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On Wednesday, BofA Securities commenced coverage on Primo Brands Corp. (NYSE: PRMB) by assigning a Buy rating and establishing a price target of $42.00. The firm’s analyst highlighted Primo Brands as the leading producer of bottled and packaged water in North America, managing a portfolio of 30 brands that includes well-known names such as Poland Spring and Pure Life. With a current market capitalization of $5.2 billion and a stock price of $32.22, InvestingPro analysis indicates the company is slightly undervalued, while analyst targets range from $40 to $48.
Primo Brands, which emerged from the November 2024 merger of legacy Primo Water (NYSE:PRMB) and Blue Triton, is anticipated to experience a rise in share price over the next 12 months. This prediction is based on the company’s ability to realize cost synergies, with expectations of achieving $300 million in EBITDA by 2026. The company’s current EBITDA stands at $1.02 billion, and according to InvestingPro data, the company maintains a GOOD financial health score, with particularly strong momentum metrics. The analyst noted that if the current multiple is maintained, it would result in an increase in both enterprise and equity value.
The analyst’s price objective of $42.00 is derived from a 12 times multiple of the firm’s estimated 2026 EV/EBITDA, which is slightly lower than the 14 times average of its peers. This discount reflects Primo Brands’ relatively lower free cash flow conversion compared to its competitors.
Additionally, the report pointed out two positive trends that could benefit Primo Brands. Firstly, bottled water is gaining a larger share of consumption within the U.S. liquid refreshment beverages (LRBs) market. Secondly, as other carbonated soft drink (CSD) producers de-emphasize their water categories, it is expected that this will enhance profitability within the bottled water category.
The analyst concluded by expressing confidence in Primo Brands’ potential for value accretion, driven by the anticipated delivery of cost synergies and favorable market trends in the beverage industry.
In other recent news, Primo Brands Corp. has been the subject of several analyst ratings and strategic moves. Mizuho (NYSE:MFG) initiated coverage with an Outperform rating, setting a price target of $43, highlighting Primo’s potential to benefit from the trend towards healthy hydration following its merger with BlueTriton. RBC Capital Markets maintained its Outperform rating with a $40 price target, emphasizing strong fundamentals and expected robust consumer demand, despite some investor anxiety over earnings. BMO Capital Markets also reiterated an Outperform rating and a $45 target, expressing confidence in Primo’s growth potential and strategic positioning, even with minor adjustments to sales and EBITDA forecasts. Truist Securities started coverage with a Buy rating and a $42 price target, citing the company’s strong market position and merger benefits, projecting revenue of $7.003 billion for fiscal year 2025. Additionally, a secondary offering was announced where two stockholders affiliated with One Rock Capital Partners (WA:CPAP) will sell 47.5 million shares, with Primo Brands agreeing to repurchase $100 million worth of its Class A common stock from these stockholders. This move is part of a shelf registration statement, with BofA Securities, Inc. and Morgan Stanley (NYSE:MS) as underwriters. These developments reflect ongoing investor interest and strategic maneuvers by Primo Brands in the market.
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