George Weston Limited (TSX: WN), Canadaâs largest food processor and distributor, released its second-quarter earnings results this morning, and its stock has responded by falling 2% in early trading. Letâs take a closer look at the results and the fundamentals of its stock to determine if we should use this as a long-term buying opportunity or if we should wait for an even better entry point next week.
The results that failed to impress
Here’s a breakdown of eight of the most notable statistics from George Westonâs 12-week period ended on June 17, 2017, compared with the same period in 2016:
| Metric | Q2 2017 | Q2 2016 | Change |
| Sales | $11,435 million | $11,075 million | 3.3% |
| Operating income | $639 million | $525 million | 21.7% |
| Adjusted EBITDA | $1,037 million | $981 million | 5.7% |
| Adjusted EBITDA margin | 9.1% | 8.9% | 20 basis points |
| Adjusted net earnings | $216 million | $200 million | 8% |
| Adjusted earnings per share (EPS) | $1.67 | $1.56 | 7.1% |
| Operating cash flow | $916 million | $777 million | 17.9% |
| Free cash flow | $543 million | $394 million | 37.8% |
What should you do with George Weston now?
I think it was a good quarter overall for George Weston, and it capped off a solid first half of the year for the company, in which its sales increased 1.6% year over year to $22.24 billion and its adjusted EPS increased 8.4% year over year to $3.09. However, the second-quarter results came up short of the consensus estimates of analysts polled by Thomson Reuters, which called for adjusted EPS of $1.68 on revenue of $11.51 billion, so thatâs why its stock has fallen 2%. That being said, I think the decline represents an attractive entry point for long-term investors for two reasons in particular.
First, it trades at very attractive valuations. George Westonâs stock now trades at just 15.8 times fiscal 2017âs estimated EPS of $6.97 and only 14.2 times fiscal 2018âs estimated EPS of $7.79, both of which are inexpensive given its current earnings-growth rate and its estimated 7.6% long-term growth rate.
Second, itâs a great dividend-growth stock. George Weston pays a quarterly dividend of $0.455 per share, equal to $1.82 per share annually, which gives it a 1.65% yield. A 1.65% yield is far from high, but itâs important to note that the company has raised its annual dividend payment for five consecutive years, and its 3.4% hike in May has it positioned for 2017 to mark the sixth consecutive year with an increase.
With all of the information provided above in mind, I think Foolish investors should consider using the post-earnings weakness in George Weston to begin scaling in to long-term positions.
