DS Smith (GB:SMDS) today increased its annual profit guidance to be higher than previously announced expectations – with “very strong” revenue growth and “effective cost mitigation” helping it drive more profits.
The company now expects its six months adjusted operating profits to be £400 million.
The company’s stock reacted positively and gained around 12% after the announcement. The stock had fallen by 35% this year as the cost of living pressure increased.
DS Smith is also confident in strong cash generation, which will help it maintain its attractive return for its shareholders. The company currently has a dividend yield of 5.3%, against the sector average of 2.18%.
Russ Mould, investment director at AJ Bell, said, “Despite falling volumes, DS Smith has demonstrated genuine pricing power. Innovation in the sector means there’s a bit more to what it produces than the soggy old cardboard boxes sitting in your attic.”
He added, “DS Smith’s ability to keep a tight rein on costs, despite significant inflationary pressures, is another tick in the box and shows this is a well-managed outfit.”
Is DS Smith stock a buy?
According to TipRanks’ analyst consensus, DS Smith stock has a Strong Buy rating, based on three Buy recommendations.
The SMDS price target is 431p, which has an upside potential of 58.9% on the current level. The analyst price targets range from a low of 378p to a high of 500p.
Conclusion
Despite lower volumes for its corrugated boxes, the company is looking at higher profits and better performance for the full year.
The company’s chief executive Miles Roberts said, “While the macro-economic outlook remains uncertain, performance this year is ahead of our previous expectations, and we look forward to the remainder of the year with confidence.”
