Saputo Stock: Is Dairy’s Spot in the Trade War a Buying Opportunity or a Warning Sign?

Saputo’s improving earnings, strategic divestitures, and high-protein dairy growth could make trade-war uncertainty an opportunity for patient investors.

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Key Points
  • Saputo stock has gained 17% over the last year, even as recent trade uncertainty has added volatility.
  • The company’s first-quarter adjusted EBITDA rose 7.6% YoY as margins improved to 9.7%.
  • Its debt reduction, strategic asset sales, and investments in high-protein dairy could strengthen Saputo’s long-term growth potential.

The escalating Canada-U.S. trade dispute has put the dairy industry in the spotlight, making Saputo (TSX: SAP) an especially interesting stock to watch on the TSX today. The company operates well beyond Canada, with major businesses in the U.S., Australia, and Europe, providing diversification even as the trade war creates new risks. Canada has imposed 50% counter-tariffs on several U.S. milk and cream products, while the White House continues to criticize Canadian dairy trade barriers.

For Saputo investors, this situation brings both uncertainty and potential opportunity. However, here’s why I believe its improving earnings and recent strategic moves could outweigh some of those concerns.

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Saputo stock

In short, this Montréal-based dairy processor produces and sells cheese, milk, cream products, cultured products, and other dairy ingredients across several major markets. Saputo stock recently traded at $40.13 per share with a market cap of about $16 billion. It also rewards investors with quarterly dividends, with its yield currently hovering at 2.1%. Despite the trade-war noise, Saputo shares have gained 17% over the last year. However, that momentum has cooled lately, as its shares have slid nearly 6% over the last three months.

The recent weakness in SAP stock comes as dairy moves deeper into the trade dispute. On September 8, Canada’s 50% tariffs on several U.S. milk and cream products came into effect. At the same time, the U.S. administration has strongly criticized Canada’s dairy tariff system and broader trade policies. Saputo hasn’t quantified the direct impact of these measures. Still, the company specifically identified tariff uncertainty as one of the factors shaping its fiscal 2027 outlook.

Strong earnings provide some cushion

While the escalating Canada-U.S. trade war could hurt investor sentiment, Saputo’s improving core business gives investors some relief. In the first quarter of its fiscal year 2027 (ended in June), the dairy giant’s revenue rose 1.5% year-over-year (YoY) to $4.4 billion. Higher dairy ingredient prices, growing high-protein ingredient volumes, and price increases implemented to offset inflationary pressures supported that growth.

More importantly, Saputo’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) jumped 7.6% YoY to $427 million. Similarly, its adjusted EBITDA margin improved in the latest quarter to 9.7% from 9.1% a year ago. Higher sales volumes, a better product mix, strong high-protein demand, and manufacturing and warehousing efficiencies all helped profitability.

As a result, the company’s net earnings from continuing operations improved by $26 million to $183 million.

Why the trade-war uncertainty could be an opportunity

Despite ongoing trade uncertainty, Saputo’s recent strategic decisions could strengthen its investment appeal. The company recently sold an 80% interest in its Argentina dairy business for about $710 million. It used part of those proceeds to repay debt.

More recently, it agreed to sell its U.K. operations for an enterprise value of roughly 988 million pounds sterling (or nearly $1.9 billion). That transaction should give this dairy giant even more financial flexibility.

At the same time, Saputo continues investing in faster-growing dairy categories, including high-protein ingredients, while spending on automation and production efficiencies.

Clearly, trade tensions remain a risk for Saputo. But its improving profitability, stronger margins, lower debt, and investments in faster-growing dairy categories could make any big drop in its stock an interesting entry point for long-term investors.

Fool contributor Jitendra Parashar has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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