Stock Market News
Bernstein upgrades Compass after pullback
Catering company Compass got a boost on Monday as Bernstein upped the stock to 'outperform' from 'market perform'' and lifted the price target to 1,750p from 1,650p following a recent pullback in the shares and ahead of what it reckons will be a stronger second half.
"We downgraded Compass last October on the reduced likelihood of a 2018 special dividend, caution around the new CEO and expectation ofthefirst margin drop in 12 years at the H1 results. All of this played out: there will be no special return this year, margins contracted inH1 and the stock is down 9% in the last year, underperforming the F TSE 100 by13%."
However, the second half is likely to see an improvement, Bernstein said, with 5% organic growth thanks to a continued strong North American performance and a recovery in Europe. It also thinks margins will expand again, resulting in earnings per share growth of 15%. In addition, it expects the company to pay another £1bn special dividend next May.
The bank expects Compass to deliver 10.5% EPS growth compound annual growth rate 2019 to 2022.Even with no re-rating, this along with the 2.5% dividend yield will mean a 13% total return.
"Compass remains the structural winner in an attractive market," said Bernstein.
In its first-half results last week, Compass said underlying operating profit rose to £875m from £837m in the six months to the end of March, as organic revenue increased 4.8% to £11.5bn.
Statutory operating profit fell 2.7% to £853m due to currency movements and EBIT before exceptionals fell 2% to £864m, which was 2% below the average City forecast of £880m.
At 1340 BST, the shares were up 1.8% to 1,535p.
"We downgraded Compass last October on the reduced likelihood of a 2018 special dividend, caution around the new CEO and expectation ofthefirst margin drop in 12 years at the H1 results. All of this played out: there will be no special return this year, margins contracted inH1 and the stock is down 9% in the last year, underperforming the F TSE 100 by13%."
However, the second half is likely to see an improvement, Bernstein said, with 5% organic growth thanks to a continued strong North American performance and a recovery in Europe. It also thinks margins will expand again, resulting in earnings per share growth of 15%. In addition, it expects the company to pay another £1bn special dividend next May.
The bank expects Compass to deliver 10.5% EPS growth compound annual growth rate 2019 to 2022.Even with no re-rating, this along with the 2.5% dividend yield will mean a 13% total return.
"Compass remains the structural winner in an attractive market," said Bernstein.
In its first-half results last week, Compass said underlying operating profit rose to £875m from £837m in the six months to the end of March, as organic revenue increased 4.8% to £11.5bn.
Statutory operating profit fell 2.7% to £853m due to currency movements and EBIT before exceptionals fell 2% to £864m, which was 2% below the average City forecast of £880m.
At 1340 BST, the shares were up 1.8% to 1,535p.
Related share prices |
---|
Compass Group (CPG) share price |
Stock News headlines are gathered from financial news sources around the web. Views and opinions on each item are from their respective authors and website. They are not opinions of LiveCharts.co.uk
Get a free widget for your website with our latest headlines.
You can now add our live prices and new headlines to your website.The news widget features quotes for Oil prices, spot Gold price and Indices plus a choice of news channel for healines.
Top Shares pages
- Share price quotes
- Share charts
- Share watch list
- Company Results Calendar
- Top Large UK Shares
- UK Market Sectors
- Stock market news
- Company news
- Share tips
- A-Z company search
More share features
POPULAR Share Prices
- Royal Mail share price
- Lloyds share price
- HSBC share price
- Barclays share price
- Prudential share price
- Santander share price
- NEXT share price
- Diageo share price
- BP share price
- Vodafone share price
- British Airways
- Centrica share price
- Tesco share price
- Taylor Wimpey Share Price
- National Grid
- GKP Share Price
- Marks and Spencer
- Rolls Royce
- Rio Tinto
- THG Share Price
- Aviva Share Price
- Boil Share price
- Easyjet Share Price
- Genedrive Share Price
- SSE Share Price
- IAG Share Price
- Boohoo share price
- HE1 share price
- AVCT share price
- BOOM share price