Carr’s Group (LSE:CARR) could be a high-potential stock that’s going under the radar. The company’s entering a new era as a focused agricultural specialist and its streamlined profile, financial strength, and potential catalysts make it an intriguing proposition for value-oriented investors.
What drives Carr’s?
After divesting its engineering division for £75m, Carr’s is now a pure-play manufacturer of livestock nutrition products, mostly feedblocks, with roughly half its revenues coming from the UK and the other half from the US.
This transformation has made Carr’s much more dependent on the agricultural market cycle, leading to greater seasonality in its results as seen in H1 FY25. With production sites in Silloth, Ayr, and Bury St Edmunds, Carr’s exports its specialist nutrition products globally, but the UK and US remain its key revenue drivers.
Momentum after transition
Recent interim results demonstrate the underlying momentum in the business. In H1 (six months to February) group revenue rose 7% to £50.6m, driven mainly by a strong 15% year-on-year increase in UK agriculture sales.
Adjusted operating profit expanded even more, up 64% to £5.9m, as margins recovered from challenges seen during and after Covid.
Yet, investors considering Carr’s must look beyond the robust first half. Management’s flagged that the second half of the year will likely be softer, particularly in the US, where herd sizes and demand for feedblocks remain below historic norms.
Seasonality is pronounced, and with the company’s new agricultural focus, volatility‘s inevitable. Management’s cautious guidance suggests that the full-year will not simply double the strong interim figures.
Running the maths
I’m not going to try and guess where adjusted earnings will end up this year. However, statutory forecasts published online suggest the company’s trading at 44 times forward earnings. Remember this is a statutory basis and the discrepancy with adjusted figures. However, this falls to 13 times for 2026 and nine times for 2027 as earnings improve.
This would put Carr’s on an earnings multiple that appears modest when set against its balance sheet strength and returning capital. Moreover, the pending tender offer could return up to £70m to shareholders, a dramatic gesture for a company of its market size. The dividend story’s also promising, with the yield projected to climb from its current modest level toward 4% by 2027.
Are tariffs a catalyst?
One of the most significant catalysts for Carr’s in the medium term is the impact of US trade policy. On one hand, higher tariffs and a weakening dollar don’t bode well for Carr’s’ exports to the US. However, the market may prove to be fairly price inelastic.
However, US tariff increases on imported beef are designed to protect and stimulate domestic livestock businesses. Over time, this could benefit Carr’s materially as a larger US herd would, in theory, lead to greater demand for feedblocks and the like.
For me, this is definitely a stock to watch. It’s becoming a more agile business and I’m excited to see how it performs once that transition dust settles. It certainly deserves attention.
