Shares in Parmalat jumped 5% to an 18-month high on Monday helped by a series of analyst upgrades, after the milk and juice group raised its forecast for annual underlying earnings.

In Milan, Banca Akros raised its price target on Parmalat shares from E1.90 to E2.05.

In the City, Evolution lifted its rating on shares in the Italian group to neutral, raising its forecast on the group's stock by E0.50 to E2.00. Rival broker Icap, crediting Parmalat with a "blowout" results, maintained a "conviction buy" recommendation on the shares.

"Despite a near 70% increase in the share price so far this year, we still see substantial value in Parmalat," Icap said.

More upgrades to come? 

The comments followed Parmalat's upgrade to E350m, from E310m-320m, in its forecast for earnings before interest, tax, depreciation and amortisation (ebitda) this year.

"Maybe we could perform even better," Antonio Vanoli, Parmalat's general  manager for operations, said.

The company credited the revision on improved performances in Australia, Italy and South Africa, and "outstanding" results from Venezuela, in the first nine month of the year.

The improvements were supported by a 14% jump in advertising spending in the July-to-September period amid a war for market share which has also seen rivals such as Dairy Crest and Danone raise marketing budgets.

Group ebitda in the quarter jumped by nearly one third to E104m, some 20% above analysts' forecasts, reflecting depressed milk costs and lower administration costs.

Stable milk prices

"Critically, Parmalat management indicated that they expected no significant aggregate increase in farm-gate milk prices for the foreseeable future and expect benign Italian farm-gate prices until the first half of next year," Icap said.

Evolution said: "The base business is performing well helped by lower commodity costs and acceleration of cost savings."

Parmalat shares touched E1.988 in early deals in Milan, their highest since May last year, before retreating to close at E1.93, up 0.2% on the day.