Something to celebrate for these two stocks

Investors have gone cool on these two companies, but numbers just out have been well received and prove it’s not all bad news.

A confident-sounding Premier Foods (LSE:PFD) eased market jitters today by insisting it is “firmly” on track to meet full-year expectations despite cost and consumer headwinds.

The Mr Kipling and Sharwood’s maker grew sales by 6% in its first quarter and reported good progress recovering input cost inflation through cost efficiencies and pricing.

Chief executive Alex Whitehouse said home cooking trends had benefited brands such as Batchelors and Nissin in the period. He added: “With this positive trading momentum behind us, we remain firmly on track to deliver our expectations for the year.”

Premier struck an upbeat tone in full-year results in May, but shares have fallen about 8% to 110p since then as investors brace for the potential impact as consumers trade down.

Volumes of branded groceries were slightly lower in today’s update, but Premier said this was in part due to tougher comparatives and that all brands benefited from price recovery to keep revenues 4.5% ahead of the previous year.

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Branded sales in the Sweet Treats division increased 3.3% in the quarter to 2 July, which compared with non-branded 26.8% higher due to contract wins and pricing benefits.

House broker Shore Capital, which left its full-year forecasts unchanged today, believes that trends of increased in-home calorie consumption may be working in Premier’s favour.

Analyst Clive Black said: “Many people continue to work from home, as they do in extreme heatwaves, while in-home prepared meals particularly by families are more relevant as essentials inflation bites many households.”

He praised the group’s branded growth model, which Black said continued to deliver market share gains while balancing price, volume, mix and margin.

Shore said Premier’s management had excelled for a number of years, having overhauled the balance sheet and boosted opportunities for organic growth, bolt-on acquisitions and shareholder returns.

A full-year dividend of 1.2p a share is due to be paid on 29 July and comes after Premier’s first award for 13 years last year. It trades with a forward dividend yield of 1.3%.

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Shore believes a current multiple of 9.4 times 2023 earnings “fundamentally undervalues” a business with a strong brand portfolio and leading market positions. Analysts at Peel Hunt agree and said shares were “excellent value” based on a target price of 145p.

The broker added: “The company should trade well in a tougher consumer environment as the product range is focused on good value everyday products with an emphasis on home cooking.”

Other companies in upbeat mood today included Harworth (LSE:HWG), the North of England and Midlands-based regeneration firm. Its shares jumped 9p to 160p after it forecast a full-year performance stronger than City hopes, underpinned by its focus on residential and logistics sectors.

Highlights in the first half included a strong leasing performance at its Bardon Hill industrial and logistics space near the M1 in Leicestershire. It has also completed the company’s largest residential land sale at Waverley, where Harworth is transforming the former Orgreave colliery in South Yorkshire into a new community.

Economic conditions mean results for 2022 are likely to be first half weighted, but chief executive Lynda Shillaw adds that supply and demand factors continue to support key markets and that the development pipeline remains robust.

She continues to focus on the delivery of the company’s strategic plan to reach £1 billion of EPRA net disposal value over the medium term.

The shares trade at a 32% discount to net asset value, which Peel Hunt says looks attractive despite the prospect of a more subdued property market over the rest of the year. The broker has a target price of 210p.