Greene King going strong

Greene King is enjoying a higher revenue in a sector which is struggling.

Greene King
Source: Bloomberg

The brewer will announce its first-half figures on 2 December, and dealers are anticipating a revenue of £1 billion. This compares with last year’s second-half revenue of £700 million. The firm will announce its full-year figures in July 2016 and dealers are expecting revenue of £2.07 billion and adjusted net income of £185 million. These estimations represent a 58% jump in revenue and a 40% increase in adjusted net income.

Greene King is going strong with the brewer registering a small increase in annual revenue, and making a big push for food sales. Profits fell on the year, in line with expectations, as impairment charges and expenses associated with pub disposals dragged the earnings lower.

Greene King also incurred advisory fees during the acquisition of Spirit. The net difference between disposals and acquisitions from the Spirit deal means the group has approximately 900 extra pubs under its banner. The UK pub trade has had a tough time recently, but Greene King still managed to achieve a 5.9% rise in sales from its retail business, which accounts for almost three quarters of its group revenue.

Equity analysts are very bullish on Greene King, and out of the 18 recommendations, 12 are buys, four are holds, and two are sells. The average target price is £9.31, which is 13% above the current price. Investment banks are also bullish on Mitchells & Butlers, and out of the 19 ratings, ten are buys, eight are holds, and one is a sell. The average target price is 432p, which is 26% above the current price.

Technical analysis from Joshua Mahony MSTA, Market Analyst

Greene King shares are seeing a resurgence of sorts over the past ten days, with price bouncing once more from a trendline dating back to the December 2014 low. Today has seen price break back above the £8.26 resistance level, thus creating a second consecutive higher high in the daily timeframe.

With price having broken through a descending trendline last week, the tide appears to be turning for the better. We are currently seeing price move through £8.32, which is convergence of the 200-day simple moving average, trendline resistance and the 100% Fibonacci expansion. A close above £8.32 would be a bullish sign that this strong run could be set to continue.

While we are likely to see the price soon retrace lower as it has done in the past, a more lasting bearish view would only come if price closes below £7.76. Initial support levels in view are at £8.32, £8.26 and £8.13. Meanwhile the next resistance levels are at £8.47 and £8.66. 

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