Goldman Sachs initiated coverage of Kerry Group with a "buy" rating on Friday, valuing the shares at €73.45 at the time of initiation and setting a 12-month price objective of €95 - implying potential upside of 29.3% from the initiation level.
The brokerage framed the call around the company's recent portfolio realignment, which concluded with the December 2024 divestiture of Dairy Ireland. Goldman Sachs described the sold unit as slower growing and more capital intensive than the remainder of Kerry's operations; in 2024 Dairy Ireland accounted for 13% of group sales and 5% of EBITDA.
According to the report, the disposal contributed to a 140 basis point increase in Kerry's adjusted EBITDA margin for fiscal 2024. The transaction leaves the group positioned as a specialist ingredients supplier concentrating on taste, nutrition and functional solutions.
Goldman Sachs reported Kerry's fiscal 2024 sales at €6.93 billion, with an EBITDA margin of 17.1%. The brokerage noted that more than 90% of Kerry's portfolio is now allocated to higher-margin ingredients following 17 acquisitions and divestments since 2020. Those corporate moves collectively repositioned roughly 40% of the business.
Future M&A is expected to focus on technology bolt-on deals rather than large-scale portfolio shifts, the report said.
On valuation, Goldman Sachs said Kerry was trading at 14x estimated 2026 earnings at initiation. The brokerage characterized that multiple as the first percentile of the company's valuation over the past decade and observed it represented a 35% discount to consumer-ingredients peers. The forward P/E multiple has contracted by roughly 50% from a 2021 peak of 32x, the report added.
The compression in valuation, the analysts wrote, reflects market concerns including GLP-1 drugs, extended consumer weakness in the United States and China, and softer volume growth in recent years.
Volume dynamics were highlighted as a central variable in the investment case. Goldman Sachs documented a slowdown in volume growth from 8% in 2022 to 1% in 2023, with volumes subsequently remaining around 3% - beneath Kerry's stated 4% to 6% target. The analysts flagged that volume recovery is key to realizing the investment thesis but also noted that across the past 20 years Kerry's volumes fell only in 2009 and 2020.
The brokerage provided a breakdown of Kerry's sales by channel and region. Channel mix was shown as 32% food service, 61% retail and 7% pharmaceutical ingredients. Geographically, 55% of sales derive from the Americas, 24% from APMEA and 21% from Europe. Goldman Sachs observed that Kerry's exposure to the food service channel is higher than that of its peers, while customer concentration remains low: no single customer contributes more than a low single-digit percentage of revenue and the top 10 customers account for about 25% of sales.
On the balance sheet, Goldman Sachs reported net debt of 0.9x estimated EBITDA for 2026 at initiation, down from higher leverage earlier in the decade. The analysts said improving cash generation and reduced leverage boost financial flexibility after completion of the portfolio transformation.
Taken together, the brokerage's initiation highlights a company that has materially shifted its mix toward higher-margin ingredients and that currently trades at historically low relative multiples, while also making volume recovery the principal execution risk cited in the report.