Glanbia Earnings: Strong Operating Margin and Optimistic 2024 Guidance Send Shares 10% Higher

No-moat Glanbia reported 2023 revenue of $5.4 billion, in line with our expectations, and an adjusted EBITA margin of 7.8%, 40 basis points ahead of our forecast. The superior margin was primarily driven by the performance nutrition segment, which delivered a second-half EBITA margin of 16.3%. This was more than 400 basis points ahead of the same period last year, benefiting from lower input costs. Although management sees some pressure coming from freight costs in 2024, they expect the EBITA margin to be maintained at around the same level next year. Further to this, the 2024 outlook also outlines mid- to high-single-digit revenue growth for the performance nutrition segment and mid-single-digit volume growth for the nutritional solutions segment, which should translate into adjusted EPS growth of 5% to 7% in 2024. This is in addition to record EPS growth of 20.5% reported for 2023. The market reacted positively to the solid 2023 performance and optimistic 2024 guidance, sending shares around 10% higher intraday. We also increase our fair value estimate to EUR 15.90 from EUR 14.20 after reflecting the 2023 numbers and 2024 guidance, as well as an upgrade of our midcycle EBITA margin to 8.0% from 7.5% previously, driven by a slightly higher expected EBITA margin for the performance nutrition segment. At current levels, shares are expensive.