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On Tuesday, Deutsche Bank (ETR:DBKGn) analyst Andre Juilard adjusted the price target for Sodexo (EPA:EXHO) (SW:FP) (OTC: SDXAY), a prominent player in the Hotels, Restaurants & Leisure industry with a market capitalization of $11.8 billion, to €93.00, down from €94.00, while maintaining a Buy rating on the stock. According to InvestingPro analysis, the stock appears undervalued at current levels. The revision comes ahead of the company’s first-half financial results, expected to be released on April 4, 2025.
Sodexo had previously reported a first-quarter year-over-year revenue growth of 4.6%, which fell short of the anticipated 5.3%. The company’s trailing twelve-month revenue stands at $26.3 billion, with a growth rate of 5.1%. The company indicated that the performance for the first half of fiscal year 2025 was projected to be less robust than the second half. Juilard anticipates that Sodexo’s second-quarter revenue will amount to approximately €6.2 billion, a 4.7% like-for-like (LfL) increase, bringing the first-half revenue to an estimated €12.6 billion, up 4.6% LfL or 3.9% on a reported basis.
The company is also expected to post an underlying earnings before interest and taxes (EBIT) of €673 million for the first half, marking a 10% rise compared to the same period in the previous year. The EBIT margin is predicted to reach 5.4%, an improvement from 5.1% in the first half of 2024, and closely aligns with consensus estimates of €670 million.
Despite skepticism from the consensus view regarding Sodexo’s ability to meet its full-year 2025 guidance, Deutsche Bank remains confident. Sodexo had announced on October 24, and reaffirmed on January 8, its fiscal year 2025 targets, which include a like-for-like top-line growth of 5.5% to 6.5% and an underlying operating margin expansion of 30-40 basis points at constant exchange rates. Supporting this outlook, InvestingPro data shows the company maintains a "GOOD" overall financial health score and has consistently paid dividends for 24 consecutive years. For more detailed analysis and additional insights, including 7 more exclusive ProTips, consider exploring InvestingPro. Juilard’s comments reflect a belief in the company’s potential to achieve these objectives.
In other recent news, Sodexo has experienced significant developments that have drawn attention from investors. Bernstein analysts downgraded Sodexo’s stock from Outperform to Market Perform, citing concerns over the company’s first-quarter revenue performance. The analysts have also adjusted the price target from €97.30 to €86.80, reflecting a cautious stance on the company’s near-term prospects. This downgrade comes amid reported challenges in Sodexo’s European operations, particularly in Facility Management, which have impacted overall performance despite opportunities in the US market.
Sodexo’s management has maintained guidance for organic sales growth and EBIT margin, but achieving these targets is expected to depend heavily on a stronger performance in the latter half of the fiscal year. Bernstein analysts have revised their estimates for Sodexo’s earnings before interest and taxes and earnings per share to be 1% below the consensus, indicating a more conservative outlook. The analysts expressed skepticism about immediate positive catalysts for the stock and suggested a higher risk of guidance downgrades. These recent developments highlight the challenges Sodexo faces in meeting its financial targets and maintaining investor confidence.
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