Cobram Estate Olives Ltd (ASX: CBO) is a consumer staples stock that has risen by approximately 43.78% over the last 12 months.
It is a producer and marketer of premium quality extra virgin olive oil. It owns two Australian brands, Cobram Estate and Red Island, which account for about half of the olive oil market share in Australian supermarkets by value.
The company also produces and markets other premium brands in both Australia and the US.
The company has export customers in roughly 17 countries.
At the time of writing, shares are trading at roughly $2.89 each.
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A down couple of months
Back in September, the company announced the successful raising of $175 million from institutional investors.
The company said the money will be used to speed up the company's growth in the US by buying more farmland and planting about 1,600 hectares of new olive groves in California by 2027.
This expansion will lift total Californian plantings to ~3,600 hectares and increase expected annual olive oil production to over 9 million litres at maturity (versus about 0.5 million litres currently).
Following this, the stock price rose to yearly highs of roughly $3.64, but since then have declined almost 20%.
Yesterday, broker Bell Potter released updated guidance on the consumer staples company.
Here's what the broker had to say.
Cost pressures for Cobram Estate
In the report from Bell Potter, the broker said CBO is facing input cost pressures, most notably from water prices.
These have almost doubled year-on-year to around $268/ML. This is well above the company's FY25 average of $139/ML and expected to remain elevated.
Fertiliser and crop protection costs are also showing modest inflation, adding further pressure to near-term margins.
Earnings changes
Bell Potter has adjusted its earnings per share (EPS) forecasts for this consumer staples stock.
Its EPS changes are -3% in FY26e, -2% in FY27e and -6% in FY28e.
This is due to lower third-party US volumes, expanded orchard development, changes to orchard depreciation, higher crop growing costs in Australia and the dilution impact of the recent equity raise.
Hold recommendation from Bell Potter
Based on this guidance, Bell Potter has maintained its hold rating on Cobram Estate Olives shares.
The broker also has maintained its target price of $2.89.
This indicates the consumer staples stock is trading at fair value.
The broker said it is currently trading at 32 x FY26 earnings, which is not compelling given its its growth profile.
