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On Tuesday, Citi analysts, led by Leo Carrington, increased the price target for Elior Group SA (EPA:ELIOR:FP) shares to EUR 4.00, up from EUR 3.80, while sustaining a Buy rating on the stock. The adjustment comes amid a backdrop of financial performance that has seen Elior’s revenue growth projections for FY25 tempered by a robust improvement in first-half operating margins.
Elior’s smaller scale in the contract catering market, relative to its peers, introduces a level of unpredictability due to the impact of significant country-specific issues, such as those in Italy, and the timing of contract commencements. Nonetheless, Citi analysts expressed confidence in the company’s growth potential, citing an expected acceleration in the second half of the year. This anticipation is supported by contracts that have been signed but not yet started, which are projected to increase growth to 2.0% in the second half from 1.5% in the first half.
The first-half gross wins on a signed basis amounted to approximately 9.0% gross contract growth, which surpasses the 7.1% recorded in the profit and loss statement. Citi’s forecast for Elior includes an 18% adjusted EBIT compound annual growth rate (CAGR) from 2024 to 2027. Given this forecast and the current valuation, which analysts consider modest compared to the company’s historical performance, Citi continues to recommend Elior Group as an attractive investment, albeit with a high-risk classification.
Citi’s commentary underscores the belief that despite the operational volatility, the underlying signed contracts are a strong indicator of future growth. This sentiment is buoyed by the company’s financials, which suggest a promising trajectory for the adjusted EBIT CAGR over the next few years. Elior’s stock continues to hold appeal for Citi, with the revised price target reflecting an optimistic outlook for the company’s financial health and market position.
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