Investing.com -- Glanbia shares fell sharply on Friday after Morgan Stanley downgraded the Irish nutrition group to Underweight from Equal-weight, warning that intensifying competition and higher contracted whey costs could put pressure on its 2027 margins and earnings.
The shares dropped 6% to €19.95, sharply underperforming the ISEQ Overall, which was last quoted 0.3% lower. The bank cut its 12-month price target to €19.20 from €21.90, implying 9.5% downside from Thursday's closing price of €21.22.
Glanbia shares have rallied around 45% so far this year, with their valuation multiple expanding about 20%, leaving less room for potential earnings disappointment, Morgan Stanley said.
The bank's concern centres on the timing of lower whey costs. Glanbia typically secures its whey supplies six to nine months in advance and still expects higher procurement costs in the first half of 2027.
Competitors with shorter purchasing commitments could access cheaper supplies sooner and use the savings to increase promotions or improve consumer pricing.
Morgan Stanley cited recent disclosures from THG, the owner of Myprotein, which indicated that its WPC80 whey protein concentrate index had fallen around 20% since September and that it had secured fourth-quarter requirements more cheaply than in the third quarter, with further lower-cost coverage for early 2027.
The bank said this could make it harder for Glanbia to sustain further price increases without sacrificing volumes or market share, particularly after several rounds of consumer price increases.
Morgan Stanley lowered its 2027 earnings-per-share estimate by 4%, leaving it 6% below market consensus. It forecasts Performance Nutrition EBITDA of $265 million, around 10% below consensus, as higher contracted whey costs and increased competitive pricing investment weigh on the division's margin recovery.
Morgan Stanley raised its 2026 EPS estimate by 2% following Glanbia's third-quarter results beat, but said the outlook for the following year had become less favourable.
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