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On Monday, Barclays (LON:BARC) analyst Lauren Lieberman increased the price target for Nomad Foods Ltd (NYSE:NOMD) shares to $23.00, up from the previous target of $19.00, while sustaining an Overweight rating on the stock. Lieberman’s analysis suggests a positive outlook on the company’s potential for disciplined mergers and acquisitions (M&A) activity in the near future.
Nomad Foods, known for its frozen food products, has shifted its focus back to M&A after several years of prioritizing internal pricing strategies and reinvestment into its brands. This strategic pivot aims to enhance innovation and renovation, particularly in its Must Win Battles, which account for half of its sales, and in growth platforms like poultry and potatoes.
The company had previously paused most of its M&A endeavors due to a wide valuation gap between buyer and seller expectations. However, with recent improvements in its core business performance, including a return to volume growth and increased gross margin flexibility, Nomad Foods is now exploring potential "under the radar" acquisitions. These targets are expected to be in line with the company’s historical approach to successful deal-making, focusing on synergy-driving assets within its subcategories and specific countries.
Lieberman highlighted Nomad Foods’ effective capital allocation, noting that since the end of 2016, the company has invested approximately €1.2 billion in M&A. This strategy has not only reduced its share base by 13% but also nearly doubled its EBITDA per share. Moreover, Nomad Foods has achieved these milestones while concurrently reducing its net debt to EBITDA leverage levels, indicating a strong financial position and prudent management.
In other recent news, Nomad Foods Ltd reported its fourth-quarter earnings for 2024, surpassing analysts’ expectations. The company achieved an adjusted earnings per share (EPS) of €0.42, exceeding the forecasted €0.38, while revenue reached €793 million, slightly above the anticipated €792.81 million. This marks a 4.3% increase in revenue from the previous year, with organic growth reported at 3.1%. In addition to its strong earnings performance, Nomad Foods raised its full-year EPS guidance for 2025, projecting an EPS range of €1.85-€1.89. Analyst Rob Dickerson from Jefferies reiterated a Buy rating on Nomad Foods, maintaining a price target of $24.00, emphasizing the company’s strategic initiatives and financial health. The analyst highlighted the company’s focus on reinvestment strategies and supply chain improvements as contributing factors to its performance. Nomad Foods’ management remains cautious about consumer sentiment but is committed to a positive volume growth trajectory. The company’s free cash flow yield is around 10%, and it maintains a healthy balance sheet, providing flexibility for future growth investments.
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