Citi raises ARAMARK stock price target to $46.50, maintains Buy

On Wednesday, Citi analysts increased their price target on ARAMARK Holdings (NYSE:ARMK) shares from $45.00 to $46.50, while reiterating a Buy rating. The stock, currently trading at $38.10, has shown remarkable momentum with a 12.59% gain in the past week alone, according to InvestingPro data. However, technical indicators suggest the stock is currently in overbought territory. The adjustment follows ARAMARK’s Q2 results, which showcased a margin improvement of 30 basis points, though InvestingPro data indicates the company still faces challenges with a gross profit margin of 15.52%. The company also reported significant gross contract wins in the first half of the fiscal year, amounting to $760 million, and a retention rate of approximately 98%, a figure not seen in years. Notably, ARAMARK has maintained consistent dividend payments for 12 consecutive years, demonstrating long-term financial stability.

Citi’s analyst, Leo Carrington, highlighted the positive aspects of ARAMARK’s performance, noting the company’s defensive end markets and staple-like demand, which could benefit from economic conditions favoring outsourcing. This environment is expected to contribute to earnings upgrades for fiscal year 2026, with the Q4 organic exit rate, excluding the impact of the 53rd week, estimated at 9.6%.

The firm’s forecast for ARAMARK’s adjusted EBIT has been slightly lifted by 0.4% for FY25 and 1.8% for FY26, reflecting the company’s strong net new business outlook and margin progression. These adjustments have led to an increase of 2.2% and 5.8% in the estimated earnings per share (EPS) for FY25 and FY26, respectively. These projections include the assumption of an additional $200 million in share buybacks for each of the fiscal years mentioned.

Citi’s revised price target is based on an unchanged valuation methodology, taking into account ARAMARK’s recent financial developments and forward-looking business prospects. The new price target of $46.50 represents Citi’s confidence in the company’s ongoing financial health and its ability to continue delivering value to shareholders.

In other recent news, Aramark Holdings reported its second-quarter earnings for 2025, surpassing expectations with an earnings per share (EPS) of $0.34, slightly above the forecast of $0.33. However, the company faced a revenue shortfall, reporting $4.28 billion against the anticipated $4.36 billion. Despite this, Aramark demonstrated a strong performance in operating income, which increased by 9.5% year-over-year to $174 million, and adjusted operating income, which improved by 11% on a constant currency basis. The company continues to expand in sports and entertainment partnerships, which has contributed to its revenue growth. Aramark maintains its full-year financial outlook, expecting double-digit revenue growth in the latter half of the year. The company also targets a 4-5% net new business increase for the fiscal year. Additionally, Aramark received positive remarks from its CEO, John Zillmer, emphasizing the company’s resilience and strategic focus. Lastly, the company recently repurchased nearly 4 million shares, reflecting its ongoing commitment to shareholder value.

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