Investing.com -- Shares of Glanbia PLC tumbled 17% following its full-year 2024 results, as investors reacted to a weaker-than-expected 2025 outlook.
Despite posting a modest earnings beat for 2024, concerns over rising input costs, competitive pressures, and doubts over management’s guidance sent the stock into a sharp decline.
The company’s 2025 earnings per share forecast of 124-130 US cents was well below analyst expectations, pointing to significant cost headwinds and weaker profitability in the year ahead.
The biggest challenge comes from whey prices, with high-end WPI whey costs now 20% higher than their 2022 peak. This surge is expected to create a $200 million cost headwind for Glanbia in 2025.
The company aims to offset $150 million of this impact through a mix of price adjustments, marketing spend reductions, and SG&A efficiencies, but margins will still take a hit.
The Performance Nutrition segment, which was previously expected to deliver 15% margins, is now projected to come in at 13-14% due to cost inflation.
Beyond rising input costs, competitive pressure in the U.S. club channel has emerged as another major challenge.
Glanbia’s Optimum Nutrition brand is facing increased competition from Costco’s Kirkland Signature private-label offering, particularly in the sports nutrition space.
The company has seen lower distribution in the club channel for Q1 2025, which is expected to weigh on first-half performance before some improvement in the latter half of the year.
The market is bracing for potential further earnings downgrades as investor confidence in Glanbia has been shaken by the weak outlook and doubts about management's guidance.
The first major EPS revision since 2021 has raised serious concerns, and the recent sharp decline in margin expectations has fueled skepticism
In response to these pressures, Glanbia has outlined several strategic initiatives aimed at stabilizing the business.
The company is moving forward with the divestment of its SlimFast and Body & Fit brands, a step that is expected to streamline operations and focus resources on core growth areas.
Additionally, a $50 million+ cost-saving program is set to run through 2027, alongside a €100 million share buyback planned for 2025.
Despite these efforts, the near-term outlook remains challenging. Glanbia’s stock now trades at approximately 11 times its estimated 2025 earnings, a 33% discount to its European consumer staples peers.