On Wednesday, RBC (TSX:RY) Capital adjusted its outlook on Collins Foods Ltd. (CKF:AU) (OTC: CLLFF) stock, reducing the price target to AUD8.20 from AUD9.00, while maintaining a Sector Perform rating. The firm's analyst cited several factors influencing this decision, including recent financial results and market conditions.
Collins Foods, known for operating KFC franchises in Australia, reported a revenue increase of 2.7% for the first half of the fiscal year 2025. The company also saw same-store sales growth (SSSg) of 0.8% in the initial seven weeks of the second half of the fiscal year.
The analyst noted that the outlook for the Australian operations appears to be improving, with lower costs of goods sold (COGS), and moderating wage and energy costs contributing to growing SSSg.
Despite these positive indicators in Australia, the company's European operations are facing challenges. The analyst pointed out that macroeconomic headwinds are impacting the European market, although the cost environment there is relatively more stable.
The analyst's commentary reflected a cautious but observant stance, suggesting that while there are signs of improvement, particularly in Australia, there are still persistent challenges. The firm is looking for further strength in Australian trading, evidence of a turnaround in European SSSg, and a moderated cost environment before changing its rating.
In summary, RBC Capital has revised its price target for Collins Foods to AUD8.20, reflecting changes to their estimates based on the company's performance and market conditions. The Sector Perform rating indicates the firm's neutral stance, as they monitor Collins Foods' progress across its various markets.
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