Global Wellness Trends Will Drive Natural Food Market Progress

Key Takeaways

• Strong innovation in health-focused and specialty ingredients, along with emerging market expansion, positions Kerry for sustained above-market growth and broader customer reach.
  
• Operational improvements, portfolio optimization, and proprietary technologies enhance margins, profitability, and competitive advantages in a consolidating industry.
  
• The company faces sluggish core market demand, currency and regulatory risks, and earnings pressure if recent gains from portfolio shifts and efficiencies prove unsustainable.

Catalysts

Provides taste and nutrition solutions.

• Kerry is poised to benefit from rising global demand for healthier, natural, and functional food solutions, as evidenced by strong volume growth in segments such as sugar/salt reduction, botanicals, and proactive health ingredients; these innovation-driven categories position Kerry for above-market revenue growth as the long-term shift toward health and wellness accelerates.
  
• Growth in emerging markets, particularly Southeast Asia and Latin America (APMEA volume up 4.2%; LatAm strong), is unlocking new sources of demand thanks to rising incomes and middle class expansion-this geographic diversification expands Kerry's addressable market and supports sustainable top-line growth.
  
• The company's ongoing investment in operational excellence and portfolio optimization (e.g., Accelerate Operational Excellence and Accelerate 2.0, focus on high-value specialty ingredients, divestment of lower-margin noncore businesses) is driving margin expansion, which should lead to higher net margins and stronger EPS growth over time.
  
• Heightened customer focus on product innovation and reformulation (especially around nutritional profiles, plant-based solutions, and ingredient replacement for scarce/raw material-constrained inputs) is fueling increased customer engagement and a robust project pipeline, which is likely to drive improved revenue visibility and sustain future earnings growth.
  
• Kerry's solid balance sheet (net debt/EBITDA 1.7x), strong cash conversion, and global leadership in proprietary taste and nutrition technologies position the company to further capitalize on long-term industry consolidation and the move toward clean-label, minimally processed solutions-bolstering its competitive moat and supporting improved long-term profitability.

Kerry Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kerry Group's revenue will grow by 3.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.1% today to 11.9% in 3 years time.
• Analysts expect earnings to reach €925.5 million (and earnings per share of €5.71) by about September 2028, up from €704.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.5x on those 2028 earnings, up from 17.9x today. This future PE is greater than the current PE for the GB Food industry at 12.6x.
• Analysts expect the number of shares outstanding to decline by 4.91% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.89%, as per the Simply Wall St company report.

Kerry Group Future Earnings Per Share Growth

Risks

• End markets across key regions (including the Americas and APMEA) are described as "flattish" or even slightly down, with softened consumer sentiment and spending patterns, indicating that volume growth may be increasingly reliant on outperformance rather than broad sectoral expansion; prolonged end market stagnation would directly limit revenue growth.
  
• Despite recent margin expansion, much of the current outperformance is attributed to portfolio benefits and accelerated operational excellence programs rather than fundamental top-line expansion; if these benefits are non-recurring or harder to replicate, net margins may be pressured in future periods, especially as cost savings and mix improvements mature.
  
• Stronger growth in emerging markets (e.g., Southeast Asia, LatAm) is a notable positive, but the company also highlighted ongoing currency headwinds (notably from the US dollar and weaker emerging market currencies) which can adversely affect reported earnings and cash flows in the long term.
  
• The business is investing in working capital and capital expenditures to support growth, but such investments increase risk if underlying revenue or volume growth weakens, potentially leading to lower free cash flow conversion and returns on capital in a world of sluggish end-market demand.
  
• Regulatory uncertainty and the need for reformulation in response to potential new regulations in North America and volatile supply chains for key ingredients (e.g., cocoa, citrus) introduce long-term risks; delays or failures in adequately responding to such changes could impact Kerry's revenue pipelines and increase compliance or innovation costs, thereby pressuring future earnings.

Valuation

• The analysts have a consensus price target of €103.091 for Kerry Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €112.0, and the most bearish reporting a price target of just €90.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €7.8 billion, earnings will come to €925.5 million, and it would be trading on a PE ratio of 18.5x, assuming you use a discount rate of 5.9%.
• Given the current share price of €77.35, the analyst price target of €103.09 is 25.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.