Aramark stock maintains Buy rating at UBS following UPenn Health contract win

Investing.com - UBS maintained its Buy rating and $45.00 price target on Aramark Holdings (NYSE:ARMK) following the company’s contract win with the University of Pennsylvania Health System. The target represents potential upside from the current price of $39.89, with InvestingPro data showing analyst targets ranging from $34 to $49.

The contract win represents a significant addition to Aramark’s portfolio, which currently generates annual revenue of $17.9 billion, though UBS notes there may be some impact from bonus expenses and startup costs associated with implementing the new service agreement. According to InvestingPro analysis, the company maintains a solid financial health score of "GOOD" and has consistently paid dividends for 12 consecutive years.

UBS views securing large contracts of this magnitude as a positive development for Aramark, potentially adding conviction to the company’s growth outlook.

From an organic growth perspective, UBS believes Aramark is positioned to achieve high single-digit percentage growth in fiscal 2026, supported by new business additions of more than 5% and pricing increases of 3-4%.

This growth projection factors in an anticipated 200 basis point calendar headwind for Aramark in fiscal 2026.

In other recent news, Aramark has invested in RoboEatz Autonomous Robotic Kitchen technology to enhance meal service for healthcare workers and visitors during overnight hours. This innovative system, developed with ABB Robotics and WellSpan Health, can prepare multiple personalized meals using fresh ingredients. Meanwhile, UBS has adjusted its price target for Aramark to $45, citing a complex outlook ahead of the company’s fourth-quarter earnings, although the firm maintains a Buy rating. Stifel also reiterated its Buy rating with a $49 price target, expressing confidence in Aramark’s growth prospects and potential for sustainable margin expansion. Additionally, Aramark has refinanced $730 million in term loans, extending the maturity to April 2028, with JPMorgan Chase Bank as the administrative agent. The company has also completed the repricing of its 2028 Term Loan B, reducing the interest rate by 25 basis points, which is anticipated to yield annual interest expense savings. These developments highlight Aramark’s strategic financial maneuvers and technological advancements in its operations.

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