Carreras’ Earnings Flat in Q3; 9M Earnings Still Hot

  • With growth in cost of sales, outpacing revenues and a falloff in other revenues, Carreras Limited (Carreras) reported flat earnings of $1.73Bn, for the quarter ending September 30, 2025 (Q3 2025).
  • Revenues rose 4.5% year-over-year (YoY) to $5.47Bn, as demand for its products remained stable due to a combination of brand loyalty and product diversification.
  • However, higher production costs and the impact of currency devaluation on imported products drove the cost of sales to grow 8.2% higher during the quarter, outpacing revenue growth. This resulted in a softening of gross margin to 5.64%, 150bps lower than Q3 2024.
  • Other operating income, which comprises interest income, gains on disposal of PPE and other miscellaneous income, also declined by 61.5% to $32.36Mn.
  • That said, the successful implementation of cost-containment measures led to lower administrative, distribution, and marketing expenses of $0.78Bn (-3.6%), which partly offset the higher COGS and lower other income.
  • Despite the flat quarter, 9M earnings are still up by 30.1% YoY, driven by 20.8% revenue growth, which outpaced COGS (+12.8%) and administrative, distribution and marketing expenses (+14.4%).
  • Although management has not reported any damage to its facilities from Hurricane Melissa, its operations may be disrupted, particularly with several retailers, including wholesalers and shops, shut down in the most affected parishes. This is likely to translate into softer Q4 earnings. However, looking ahead, strong brand loyalty and the inelastic nature of its products should support normalisation of earnings.
  • Carreras' stock has appreciated 26.6% year-to-date due to stronger earnings and increasing dividend payments since the start of the year, closing at J$16.52 on Wednesday. At this price, the stock trades at a price-to-earnings (P/E) ratio of 10.9x, which is lower than the Main Market Manufacturing & Distribution Sector’s average of 18.6x. This implies that the stock may be undervalued.

(Sources: JSE & NCBCM Research)