Skip Header
Important information: The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This is a third-party news feed and may not reflect Fidelity’s views.

Shore Capital sees upside risk at Compass after strong Q1

(Sharecast News) - Shore Capital has reiterated its 'buy' rating on Compass Group after a first-quarter trading update from the catering giant on Thursday, saying trading is tracking ahead of full-year assumptions. The company, which is targeting a high single-digit increase in organic revenues for the 12 months to 30 September 2024, said first-quarter organic sales were up 11.7%. Compass said like-for-like volumes were better than anticipated, especially in its Business & Industry division, which accounts for a third of group revenues.

"The 11.7% outturn for Q1 was comfortably above our full-year assumption for organic revenue growth of c.9%, implying modest upside risk to forecasts as the year progresses," Shore Capital said.

Compass completed net acquisitions of $350m in the period, having also announced the $600m acquisition of UK-based peer CH&CO in January, with M&A "likely to be a greater feature of the investment case than in recent years", the broker said.

Compass also said it had completed $100m of the up to $500m share buyback, whilst also issuing a new €750m sustainable bond maturing 2031, with the proceeds used to refinance an existing €750m maturing his year.

"Based on current estimates, recent M&A and completion of the $500m share buyback, we would expect Compass to remain comfortably within the target net debt-to-EBITDA range of 1.0-1.5x, leaving plenty of headroom for further capital events," Shore Capital said.

The broker estimates a fair value of the stock of 2,400p per share, indicating further upside from Thursday morning's price of 2,211p, up nearly 3% on the day.

Share this article

Related Sharecast Articles

Tesla lays off 285 workers in Buffalo as job cuts continue
(Sharecast News) - Electric carmaker Tesla is to lay off 14% of its staff across two plants in New York, the company said in a regulatory filing on Thursday, following large-scale job cuts announced earlier in the week.
Blackstone first-quarter earnings narrowly beat forecasts
(Sharecast News) - Blackstone, the world's largest private equity firm, reported marginally better than expected first-quarter earnings on Thursday.
TSMC forecasts jump in second-quarter sales
(Sharecast News) - Taiwan Semiconductor Manufacturing Co said on Thursday it expects sales to jump in the second quarter on strong demand.
Empire Metals completes third phase of drilling at Pitfield
(Sharecast News) - Empire Metals announced the successful conclusion of its third phase of reverse circulation (RC) drilling at the Pitfield Project in Western Australia on Thursday.

Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

Award-winning online share dealing

Search, compare and select from thousands of shares.

Expert insights into investing your money

Our team of experts explore the world of share dealing.