Investors unload URC shares after lower-than-expected Q3 earnings

By Mark T. Amoguis
Senior Researcher

GOKONGWEI-LED Universal Robina Corp. (URC) was among the most traded stocks last week as investors started to unload some of their shares after the company’s third-quarter earnings fell below expectations.

A total of P1.195 billion worth of 7.786 million URC shares exchanged hands from Oct. 21 to 25, making it the fifth most traded issue in the local bourse, the Philippine Stock Exchange data showed.

The stock declined by four percent on a week-on-week basis to P150 apiece last Friday. Since the start of the year, however, it has risen by 17.6%.

“The third quarter 2019 earnings release is the biggest catalyst that drove the stock’s price movement. It has been on a narrow consolidation for the past several days before breaking down the day of its earnings release,” Paola Beatrice C. Lopez, equity analyst at Regina Capital Development Corp., said in an e-mail interview last Friday.

“We have been expecting that URC will be able to sustain the positive growth it had shown for the past two quarters, so its (third-quarter) results came as a surprise. This resulted in the stock’s breakdown,” she said.

In a separate interview, AP Securities, Inc. Senior Research Analyst Rachelle C. Cruz said URC’s third-quarter earnings were below estimates, setting the market expectations for the consumer sector.

“People are banking on the recovery of its coffee segment… apparently this third quarter, [URC’s] competitors are aggressively doing marketing efforts… The competition has led to slowdown the coffee volume of URC…,” Ms. Cruz said in a phone interview on Friday.

URC, which makes Great Taste and Blend 45 coffee, has described itself as a “competitive 3rd player in the coffee business.”

In a disclosure last Thursday, URC reported a 6.2% year-on-year decline on its attributable net income to P1.968 billion despite registering a 6.2% growth in its revenue to P32.744 billion during the three-month period.

This brought URC’s nine-month attributable net income to P6.997 billion, an increase of 2.9% from last year. Its top line, meanwhile, went up by 5.8% to P99.785 billion during the January to September period.

Accounting for the bulk — almost 80% — of its revenues during the nine months to September is URC’s branded consumer goods group, which includes Jack’N Jill snacks, C2 tea and Nissin noodles, Revenues under this segment increased by 3.8% to P79.017 billion from P76.113 billion previously.

Its agro-industrial segment jumped by 18% to P9.963 billion, while the commodity foods group inched up by 1.6% to P10.805 billion.

The company targets a 7-9% increase in its sales this year, banking on the recovery of its coffee segment as well as the growth of its food and agro-industrial businesses.

For this week, URC will be trending sideways with some downward bias, AP Securities’ Ms. Cruz said, placing the stock’s support and resistance levels at P143.2 and P160, respectively.

For Regina Capital’s Ms. Lopez: “Given the bearishness of its indicators, it is likely that URC will bottom out first before investors pick up again.”

Ms. Lopez pegged URC’s support and resistance levels at P144-149.5 and P156.3, respectively.