We increase our fair value estimate for no-moat Glanbia GLB by 9% to EUR 14.2 following a solid third-quarter trading update and a full-year guidance upgrade. Management now expects to deliver 2023 adjusted EPS growth in the range of 17% to 20% from a range of 12% to 15% previously. We are also increasing our midterm EBITA target to 7.5% from 7.0% previously as we have seen margin recovery in the performance nutrition and nutritional solutions ahead of our prior expectations. We believe Glanbia will be able to hold on to some of these gains at the group level, although we expect that the 14% to 14.5% EBITA margin expected for 2023 for the performance nutrition segment will be difficult to maintain going forward given pressure from increasing customer acquisition costs, especially for the ailing SlimFast brand. We are also updating our valuation model to reflect the recent change in reporting currency from EUR to USD. Shares were up around 7% at the time of writing following the guidance upgrade and the sequential improvement in volumes in the third quarter (from negative 4.1% for the first half to negative 2.5% for the first nine months). We believe shares are fairly valued at current levels.

All segments contributed to the volume improvement in the third quarter. Pricing remained challenged in the nutritional solutions and the U.S. cheese segments as a result of the decline in dairy market prices.

The performance nutrition segment delivered like-for-like reported revenue growth of 2.7% in the first nine months, with an 8.9% contribution from pricing offset by a 6.2% decline in volumes. The volume decline was primarily driven by SlimFast, which saw a continued decline in U.S. consumption, while Optimum Nutrition and the other smaller brands continued to see positive consumption trends. Management expects the segment to deliver 5% like-for-like growth for the year, with a strong recovery in the fourth quarter given a weak comparator from the prior year.