Primo Brands: BMO initiates at Outperfrom, sees strong earnings

Investing.com– BMO initiated coverage of Primo Brands (NYSE:) with an Outperform rating and a strong price target, calling the stock an attractive pick on its large market share of water brands in the U.S.

BMO rated the stock at Outperform with a $40 price target, representing a nearly 30% upside from Primo’s Friday close of $31.07. 

The brokerage said Primo’s current price represented “an attractive opportunity at a compelling entry point,” and expects the firm to clock strong adjusted EBITDA growth on robust sales and healthy margins.

BMO expects the firm to see revenue growth of at least mid-single digits on support from its brand names. This opens a pathway for adjusted EBITDA margins to reach mid-20% in the coming years, the brokerage said. 

Primo was formed last year by the merger of Primo Water and BlueTriton Brands, and owns several major packaged drinking water brands, including Poland Spring, Pure Life, Mountain Valley and Saratoga. 

BlueTriton was a North American subsidiary of European consumer giant Nestle SA (SIX:), and had sold its bottling operations to private equity in 2021.