Glanbia shares tumble 6% after Morgan Stanley cuts rating to underweight

On Friday, Glanbia shares plummeted 6% following Morgan Stanley's downgrade to an Underweight rating, citing intensifying competition and rising whey costs that could strain its 2027 margins and earnings. The stock plummeted to €19.95, significantly lagging the ISEQ Overall, which dipped 0.3%. Morgan Stanley slashed its 12-month price target to €19.20, indicating a 9.5% downside from Thursday's close of €21.22.

The firm noted that Glanbia's valuation multiple had expanded by 20%, leaving limited room for further earnings disappointment. The bank's concerns revolve around the timing of lower whey costs. Glanbia usually secures whey supplies six to nine months in advance and anticipates higher procurement costs in the first half of 2027.

Morgan Stanley highlighted THG, the owner of Myprotein, which reported a 20% drop in its WPC80 whey protein concentrate index since September, along with securing cheaper requirements for the fourth quarter, including early 2027. This could make it challenging for Glanbia to persistently raise prices without sacrificing volumes or market share, especially after multiple consumer price hikes.

Morgan Stanley reduced its 2027 earnings-per-share estimate by 4%, positioning it 6% below market consensus. It forecasts Performance Nutrition EBITDA of €265 million, roughly 10% lower than consensus, due to higher contracted whey costs and heightened competitive pricing investments. Despite a 2% increase in Morgan Stanley's 2026 EPS estimate following Glanbia's Q3 results beat, the outlook for the subsequent year has become less favorable.