CNBC’s Jim Cramer on Thursday explained why he’s fairly positive on Magnum Ice Cream Company, which made its Wall Street debut earlier this week after spinning off from consumer giant Unilever.
“We finally, by the grace of God — or at least, the grace of Unilever — have a pure play ice cream stock, now that The Magnum Ice Cream Company has been spun off and started trading independently,” he said. “And, after taking a closer look at the story, I have to say, this one’s pretty sweet.”
Magnum Ice Cream might fare better as an independent company than as part of a giant conglomerate, Cramer suggested. He noted that the company struggled for a while under Unilever but said business has picked up since the dessert maker started spinning off. He indicated the improvement could be in part a result of the company’s autonomy and ability to concentrate on the product.
Cramer cited comments from Magnum Ice Cream CEO Peter ter Kulve, who told CNBC that “Unilever had to focus on its category, and we needed real focus on ice cream.” ter Kulve said his company is now able to invest in its “growth opportunity” without having “to balance that between all kinds of different categories at Unilever.”
Cramer stressed that Magnum Ice Cream is the biggest player on the field as it owns some of the world’s largest brands: Wall’s, Ben & Jerry’s, Cornetto, Breyer’s, Good Humor, Klondike, its namesake, as well as Talenti gelato. Magnum Ice Cream claims it has 21% global market share, Cramer pointed out, which is almost double that of its leading competitor.
Magnum Ice Cream also seems able to handle the rise of GLP-1 weight loss drugs, Cramer said, even as the broader snack and junk food industry has been hurt by the trend.
Now might be a good time to buy the stock because the price-to-earnings multiple is lower than many of its packaged goods peers, Cramer said, such as Mondelez, Hershey and Nestle. However, he conceded that those names are expected to grow their earnings next year while Magnum Ice Cream is anticipating small loss.
“Still, the stock’s trading at a pretty sizable discount to its peers,” Cramer said. “So if you want to bet on the ice cream business, you’ve got my blessing to do some buying right here.”
Magnum Ice Cream did not immediately respond to request for comment.
