Tate & Lyle Shares (LON: TATE) Gain New Analyst Coverage

Tate & Lyle PLC (LON: TATE) has been the subject of heightened market attention following a series of analyst ratings and corporate developments. Despite near-term headwinds, some firms see long-term potential, leading to varied price target adjustments and renewed investor consideration.

Price Targets

The stock has experienced volatility, reflecting uncertainty in the food and beverage ingredients sector. Year-to-date, the stock is down -22.49%. The movements are influenced by both company-specific news and broader macroeconomic conditions, including concerns about consumer confidence and deflationary pressures.

Morgan Stanley initiated coverage of Tate & Lyle with an ‘Equal Weight' rating and a price target of 590 pence. This cautious stance acknowledges the company's potential while simultaneously highlighting the challenging market environment. The firm cited “softer and deflationary backdrop” as a factor clouding near-term growth. Adding to the coverage, UBS initiated coverage with a ‘Neutral' rating, also setting a price target of 590 pence. UBS pointed to limited near-term catalysts, even after the company's acquisition of CP Kelco in 2024. The investment bank projected a modest organic sales growth of 2.9% for FY26, slightly above consensus, and an adjusted EBITDA of £458 million, aligning with market expectations. The company's significant U.S. exposure, given the fragile consumer sentiment, was identified as a potential risk.

Contrasting the recent neutral outlooks, Barclays upgraded Tate & Lyle's rating to ‘Overweight' in April, though they slightly reduced the price target to £7.40 from £7.50. This decision followed an unscheduled pre-close trading update, indicating FY25 performance aligning with revised guidance. While organic revenue declined by 5%, EBITDA was projected to increase by 4%, showcasing underlying profitability resilience. Barclays anticipates a 3% constant currency EBITDA growth for FY26, excluding CP Kelco, and expects the net debt to EBITDA ratio to improve to 1.9x in FY26 and 1.5x in FY27.

However, not all analyst actions were positive. Berenberg Bank downgraded Tate & Lyle to ‘Hold' in February, substantially reducing the price target from 900 pence to 600 pence. This downgrade reflected concerns about pricing conditions and volume outlook, leading to downward revisions in EBITDA forecasts by 2.5% for FY25 and 11.5% for FY26. This downgrade weighed on the stock in February, when shares plummeted by 11% after revised profit guidance was announced. The company cited a lack of acceleration in Food & Beverage Solutions volumes, expecting EBITDA growth at the lower end of the previously stated 4-7% range. Pricing pressures and a slower-than-anticipated second half contributed to this revision, with revenue expected to be mid-single-digit percent lower for the fiscal year.

In efforts to bolster shareholder value, Tate & Lyle has been actively engaged in a share buyback program. In late 2024, the company repurchased 130,857 and 194,331 ordinary shares, respectively, to be held in treasury. These shares were bought at average prices ranging from £6.62 to £7.38 per share. Further reflecting internal confidence, a Person Discharging Managerial Responsibilities (PDMR), along with an associate, acquired 8,200 ordinary shares at £5.376255 each, totaling £44,085.29, increasing their total shareholding.

Adding another layer of complexity, Tate & Lyle's shares experienced a surge in October 2024 amid speculation of a potential takeover by U.S.-based private equity firm Advent International. Reports suggested Advent was formulating a bid exceeding Tate & Lyle's market valuation of £2.8 billion, although no definitive offer materialised.

Analyst Summary: Bull and Bear Cases

The analyst coverage and share price movements reflect a complex interplay of strategic initiatives, market challenges, and external economic factors. While efforts to enhance shareholder value and expand the portfolio are apparent, external market conditions and internal performance metrics will continue shaping its financial outlook. The conflicting signals from analysts, ranging from ‘Overweight' to ‘Hold,' highlight the uncertainty surrounding Tate & Lyle's near-term prospects. Ultimately, the company's ability to navigate pricing pressures, capitalize on the CP Kelco acquisition, and manage its debt will determine whether it can achieve the growth anticipated by some analysts.