Greene King's shares fall as Canaccord cuts target price, lowers guidance

Greene King’s shares fell on Friday as Canaccord Genuity reiterated a ‘buy’ rating but cut the target price to 850p from 900p and lowered its earnings guidance.

The pub operator reported strong trading over the Christmas period on Friday as it sounded a confident note on its outlook.

In the 40 weeks to 5 February, like-for-like sales grew 1.1%. Excluding Fayre & Square, LFL sales were up 1.6% over the period.

Over the last 16 weeks, the company said it had seen strong Christmas trading, alongside the usual quieter months of November and January.

In the three weeks over Christmas, LFL sales were up 4.5%, despite tough comparisons with the previous Christmas, with sales driven by particularly strong growth in London. Greene King said it broke its record for Christmas Day again, with sales up 6% on the previous year to £7.4m.

Greene King said it made further progress on the Spirit integration, with over 1,000 pubs now converted to the 'best of both' Pub Company IT system and ongoing synergy savings realised.

“It's disruptive and hard work to stitch two big companies together but investors should not lose sight of the goal that Greene King is after,” Canaccord said.

“Greene King and Spirit together is a much better investment proposition with higher quality earnings, stronger FCF and better growth prospects than before.”

Canaccord said it remains positive on the Spirit integration where synergies continue to come through. The broker expects synergies of £30m this year, which puts the company on track to achieve the original three-year target in two years.

Canaccord downgraded its estimates for earnings per share in fiscal year 2017 by 1.8% to 70.4p. It also reduced its forecasts for 2018 and 2019 by 3.7% and 4.2% respectively.

Shares fell 1.07% to 693.50p at 0936 GMT.