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Why George Weston Limited Is Down 2% Today

George Weston Limited (TSX:WN), Canada’s largest food processor and distributor, released its second-quarter earnings results this morning, and its stock has responded by falling 2% in early trading. Let’s 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 Weston’s 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 that’s 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 Weston’s stock now trades at just 15.8 times fiscal 2017’s estimated EPS of $6.97 and only 14.2 times fiscal 2018’s 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, it’s 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 it’s 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.

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Fool contributor Joseph Solitro has no position in any stocks mentioned.

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