Challenges In The U.S. Weighing On Gruma

Mexico’s Gruma (OTC:GMKKY) may be defensive insofar as it is a leading food company and a leading player in tortillas and corn flour in the U.S., but “defensive” doesn’t mean immune to share price declines. Largely due to weaker results in the U.S. business, Gruma shares have lost about 13% of their value since I last wrote about the company – a decline that seems outsized relative to the actual erosion in performance and expectations.

Gruma is well-run and has room to grow its business in both Mexico and the U.S., but it’s not a particularly dynamic company and it’s hard to see what would shift sentiment quickly. Steady execution will bring the Street around in time, yes, but that could take several quarters. More clarity on management’s priorities for free cash flow could help, particularly given the concerns that the company will make value-destroying acquisitions. This looks like a name for investors who want to shop in the bargain bin, but sentiment is lousy with the stock at four year-plus lows.

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Challenges In The U.S. Weighing On Gruma