Saskatchewan Wheat Pool shares took a tumble last week after the company said earnings for the first six months of the fiscal year will be down 30 percent.
Class B share prices on the Toronto Stock Exchange dropped from $18.80 to $16.50 after a March 11 news release issued by the pool. The next day, the price declined another 10 cents, where it held steady to the end of the week.
Pool chief financial officer Lyle Spencer said he was not pleased with the market’s reaction, but wasn’t alarmed.
“I’ve spoken to a number of investment firms,” he said. “My feeling and theirs is that the market overreacted.”
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Fares Boulos, an analyst with Goepel Shields and Partners in Vancouver, said the market’s reaction was normal.
“It’s no surprise. It happens every day,” he said.
RBC Dominion Securities analyst Irene Nattel said her outlook remains positive.
“Market reaction, which was to slash 13 percent off the pool’s share price, appears overdone but is understandable given the market’s relatively short history with the pool,” Nattel said in a report. “At current prices, we recommend investors take advantage of the current weakness in the share price and buy SWP B with a one-year target price of $21.”
Nattel upgraded her position on the shares from one month earlier when she recommended a hold rather than buy.
Boulos also recommended investors take advantage of the lower price to buy shares because they are a good long-term investment.
“Look at it as merchandise on sale at a department store,” he said.
The pool, which was to release detailed numbers this week, blamed reduced earnings on difficulties in the canola crushing industry and shipping problems to the west coast.
CanAmera Foods will report lower earnings due to poor margins caused by short seed supply and lower vegetable oil prices, Spencer said. A lesser factor was some restructuring at CSP Foods.
Nattel said earnings in the first half of the year typically account for only 35 percent of annual earnings.
