-- CIBC Capital Markets has raised its price target on the shares of Premium Brands Holdings (PBH.TO) to C$115.00 from C$110.00, while maintaining its outperformer rating, the bank said in a note dated May 7 and analyzing the company's Q1 result.
"Overall, Q1 results were good enough against modest expectations and considerable pessimism baked into the stock, which was -16% YTD into the print," said CIBC.
Commodity inflation has largely been addressed through price, and now the key for PBH will be delivering on its U.S. growth pipeline, leveraging newly-built capacity, and delivering stronger cash flow, said CIBC. CIBC remains optimistic that this will materialize throughout 2026, and view risk/reward as compelling with shares trading near historical lows (9.5 times EBITDA and 14.4 times price earnings on its 2026 estimates).
However, CIBC believes that "more concrete signs of progress are needed to drive a more meaningful re-rate."
"Our estimates are little changed and our price target moves to $115 (from $110)," added CIBC. "PBH stays Outperformer."
CIBC said, based on comments made on the earnings call, it sounds like the company is looking at bringing a strategic partner into PFD, and "increasing disclosure around this suggests a deal could be getting closer." CIBC views this as a "positive catalyst", however, it does not interpret this "as meaning a full divestment of PFD in the near term" and believes a full sale of that business would be opportunistic given a limited pool of potential buyers.
Among other highlights the bank also noted cash flow is "still light, but expected to improve".
CIBC noted free cash flow was ($91 million) in Q1, and included working capital investment of $113 million, though near $96 million of this came from Stampede, which takes large inventory positions in Q1 to hedge fixed-price annual contracts with customers. It noted growth-related working capital build has been a "significant drag", with outflows of $380MM over the last twelve months, or 54% of EBITDA," but said this is expected to improve throughout the summer. Meanwhile, the bank noted, capex has declined from peak levels ($207MM TTM vs. near $300MM to $400MM in recent years), and the company is not planning additional major investments over the next several years.
CIBC continues to view FCF improvement as a "key catalyst" for PBH in 2026.
Price: $89.47, Change: $+0.89, Percent Change: +1.00%