Tate & Lyle tops FTSE 250 on Liberum upgrade

LONDON (ShareCast) - (ShareCast News) - Tate & Lyle (LSE: TATE.L - news) was the standout gainer on the FTSE 250 after Liberum upgraded the stock to 'buy' from 'sell' and lifted its price target to 670p from 505p. "While history is disappointing - four profit warnings and a collapse of around 40% in pre-tax profits since full-year 2014 - we see early signs of change and scope for significant upside," it said.

The brokerage said full-year 2016 will prove an inflection point and forecasts a 16% rebound in full-year 2017 pre-tax profit as one-off items drop out and new Speciality Food Ingredients capacity comes online.

Liberum said the key question is whether management's strategy can deliver visible, sustainable earnings growth beyond FY17.

In order to determine the potential, it benchmarked Tate's operations with US-based Ingredion, which is the group's closest peer. It (Other OTC: ITGL - news) said the results are reassuring.

"As we suspected, many facets of Tate's operations compare favourably to Ingredion. In our view, Tate's historical difficulties are grounded in execution and strategic ambition, areas that management is working to address." It added that the company's commitment to a flat dividend in full-year 2016 implies a 5% yield which appears sufficient to support the shares buying time for management to turn around the business and work towards executing the group's long-term strategy.

At 1028 BST, Tate shares were up 2.6% at 566p.