RBC reiterates 'outperform' on Compass following 'excellent start to the year'
Analysts at RBC Capital Markets reiterated their 'outperform' rating on British contract foodservice provider Compass on Thursday following a strong performance by the group in Europe over the first quarter of its trading year.
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RBC said Compass has continued to deliver in Q1, noting that its most recent results were indeed a "reminder of the strength of the equity story".
Whilst the Canadian broker acknowledged that the derating of 'bond proxies' was a risk, RBC felt Compass was "one of the better-valued defensives in the sector" and it expects trading to remain strong, with balance sheet options.
RBC, which also reiterated its target price of 1750p on Compass, said the firm's outlook "remains positive", with full-year organic growth now expected to be "slightly above" the middle of 4-6% range with modest margin progression.
"Overall an excellent start to the year," said RBC.
"We remain at 'outperform' and see the valuation (19x 19E PE) as more than justified in the context of the sector."
RBC also noted that in a sector where diversification has "generally caused mishaps", it believes Compass' focus on a single specialism was a "key differentiator".
"The investment it has made in branding, sectorisation and procurement has meant it has grown faster, with higher margins than catering peers and especially those that have gone down the bundled services FM route," added RBC.