Citi raises SSP Group stock price target to GBP3.20, maintains Buy

On Thursday, Citi analysts increased the price target for SSP Group Plc (SSPG:LN) (OTC: SSPPF) to GBP3.20, up from GBP3.10, while reaffirming a Buy rating on the stock. According to InvestingPro analysis, the company appears undervalued at its current market capitalization of $1.83 billion. The analysts highlighted SSP Group’s ability to drive organic growth, projecting increases of 9%, 6%, and 6% for fiscal years 2025, 2026, and 2027, respectively. This performance comes despite challenges such as the slowing growth in North American air travel and a strategic shift by SSP to slow down inorganic growth and new contract acquisitions in favor of improving returns.

SSP Group, which operates food and beverage outlets in travel locations, is navigating through a period marked by economic uncertainty. The company has demonstrated strong performance with revenue growth of 14% over the last twelve months and EBITDA of $499 million. Citi’s analysts are closely observing trends in US air travel growth for potential signs of further decline or recovery. They note that SSP’s diversified growth avenues position it well to handle such industry fluctuations.

The company’s efforts to enhance margins and reduce capital intensity are reportedly advancing successfully, particularly in the more challenging markets of the UK and Continental Europe. InvestingPro data shows the company maintains a healthy gross profit margin of 29.2% and strong free cash flow yield. These regions are expected to contribute significantly to earnings per share (EPS) growth. Citi forecasts a compound annual growth rate (CAGR) of 21% in SSP’s EPS from 2024 to 2027.

The analysts also speculate that SSP’s improving profitability could allow for a share buyback program. They anticipate that the company might announce a buyback of approximately GBP75 million at the end of fiscal year 2026. InvestingPro subscribers can access additional insights, including 8 more ProTips and comprehensive financial metrics to better evaluate SSP Group’s investment potential.

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