A surge toward private-label beverages has translated into a surge of interest in Cott Corp. , with investors following up last week's 40 per cent gain with another 15 per cent pop Monday.
"After two to three years of enduring the perfect storm of weak industry volume fundamentals and an elevated input cost environment, not to mention a loss of focus on the core business, the fizz may have finally returned in Cott's business and stock price," BMO Nesbitt Burns analyst David Hartley said, as he increased his price target to $6 from $1.
"We believe it is a much better bet today to announce that a turnaround is under way.Trends in private label volume growth and commodity input costs appear to have turned favourable."
Friday, the beverage maker reported a first quarter profit of 28 cents a share, far exceeding analysts' expectations of a 5 cent loss. The shares hit a 52-week low of 74 cents in December, and are nearing their 52-week high of $5.12 set last May.
Cott, the world's largest maker of private-label soft drinks, benefited from a trend that saw consumers choose discount-brand products in favour of pricier offerings from companies such as Coca-Cola and Pepsi. Despite the movement toward its products, the company had seen its shares fall more than 20 per cent this year after retail giant Wal-Mart ended its exclusive U.S. supply agreement with the company. The retailer represented 30 per cent of Cott's business.
More to come