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(Sharecast News) - Panmure Liberum upgraded Greggs to 'buy' from 'hold' on Thursday and hiked the price target to 2,440p from 1,560p after the bakery chain's third-quarter trading update a day earlier.
The broker noted that like-for-like sales accelerated meaningfully through Q3, prompting management to raise guidance for FY26 pre-tax profit.
Greggs said on Wednesday that total sales rose 7.7% in the 13 weeks to 26 September, or by 3.4% on a like-for-like basis, which it attributed to ongoing menu innovation and more settled weather. Coupled with "strong" cost control, Greggs said it now expected a "modestly improved" outcome for 2026.
The company also unveiled plans to overhaul its manufacturing operations, with the potential loss of more than 700 jobs.
"We upgrade our profit before tax forecasts by circa 2% to reflect the stronger trading," said Panmure. "Our revised H2 PBT requirement still looks achievable despite the incremental Derby cost headwind, supported by improving underlying momentum, circa £7m of targeted H2 cost savings and moderating inflation."
Panmure said that perhaps more significant is management's expectation of around £20m of annual pre-tax cash savings from consolidating the manufacturing base, which provides meaningful support to recently moderated outer-year consensus forecasts.
The broker said pre-statement consensus had implied around £35m of pre-tax profit growth between FY26E and FY29E.
"Looking ahead, earnings growth should also be supported by the new-space rollout, continued B2B momentum and lower cost inflation versus FY25, while cash generation should improve materially," Panmure said.
"With the company rapidly pivoting from an earnings downgrade cycle to an upgrade cycle, alongside improving cash generation, we move back to buy with a 2,440p target price."
At 1355 BST, the shares were down 1.7% at 1,993p.
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