On Friday, Bernstein analysts downgraded shares of Sodexo (EPA:EXHO) from Outperform to Market Perform, adjusting the price target to €86.80 from the previous €97.30. The stock, currently trading at $15.18, sits near its 52-week low of $14.78, significantly below its high of $25.00. The downgrade follows a reported weakness in the company's first-quarter revenues, which has sparked concerns about its ability to meet its full-year targets. InvestingPro data reveals the company maintains a GOOD overall financial health score despite recent challenges.
Sodexo, which operates globally, has seen a mixed performance across different regions. While the strength of the dollar and the robust US economy present multiple outsourcing opportunities, the company's European operations, especially in Facility Management, have negatively impacted its overall performance. Recent financial data shows revenue growth of 5.13% and a modest gross profit margin of 11.95%.
The management team at Sodexo has maintained its guidance for organic sales growth (OSG) and EBIT margin. However, the achievement of these targets seems heavily reliant on a stronger second half of the fiscal year, particularly the third quarter. Bernstein analysts have expressed skepticism regarding any immediate positive catalysts for the stock and believe there is a greater risk of a guidance downgrade than there is potential for an upside.
As a result of the recent developments and the anticipated challenges, Bernstein has revised its estimates for Sodexo's earnings before interest and taxes (EBIT) and earnings per share (EPS) to be 1% below the consensus. This revision directly influenced the decision to reduce the price target to €86.80. The new rating and price target reflect the analysts' current view of the stock, which suggests a more cautious outlook on Sodexo's near-term financial performance.
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