Can DS Smith justify its upcoming induction into the FTSE 100 with next Thursday’s half year results?
After trading between £4.25 and £4.50 for the first half of the year, the packaging firm really hit its stride at the end of June with its annual report. From that point on it has – by and large – kept climbing, culminating in an all-time high of £5.67 on 29th November. DS Smith PLC (LON:SMDS) now sits at a current trading price of £5.42.
It’s not hard to see why that full year update proved to be a turning point in the company’s 2017. Revenue rocketed 18% higher to £4.78 billion, with an even more impressive 31% surge in pre-tax profit to £264 million. Yet the real big news wasn’t those stellar figures but the announcement that DS Smith had bought an 80% stake in paper and corrugated packaging firm Interstate Resources for £722 million (with the option to snaffle up the other 20% in 5 years’ time), a move that saw the company take its first step into the US market.
That US deal was the focus of September’s first quarter statement, as DS Smith confirmed it had completed the acquisition at the end of August. The rest of the update skewed positive as well, with the company stating that it had seen an ‘encouraging start to the year’ and that progress with its ‘pan-European and e-commerce customers was particularly strong’.
The firm’s chipper tone remained in place at the end of October, as DS Smith claimed that volume had been ‘consistently very strong’ throughout the half year period, while stating it expects to complete its mid-October acquisitions of Ecopack (KA:ECOP) and EcoPaper in Romania at some point in the third quarter.
In terms of next week’s interim figures, then, investors will be looking for great things. Double digit revenue and profit growth will be expected, while the markets will be especially interested in how much Interstate Resources has contributed in the last few months.
DS Smith PLC has a consensus rating of ‘Buy’ alongside an average target price of £5.40.
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