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On Tuesday, Goldman Sachs adjusted its stance on B&M European Value Retail SA (LON:BMEB) (BME:LN) (OTC: BMRRY), downgrading the company’s stock rating from Buy to Neutral. This shift came with a revised price target set at £3.10, a decrease from the previous target of £4.30. The decision by Goldman Sachs reflects concerns over the company’s financial outlook and market challenges.
The downgrade was primarily influenced by B&M’s updated earnings guidance for FY25. The retailer now anticipates pre-IFRS 16 EBITDA to be between £605 million and £625 million, a reduction from the prior range of £620 million to £650 million. This revision is attributed to several factors including the current trading performance, a vague economic forecast, and potential non-cash impacts stemming from exchange rate fluctuations on the valuation of stock and creditor balances.
Goldman Sachs analyst Richard Edwards highlighted the allowance for an adjusted EBITDA benefit or reduction of approximately £5 million at both ends of the range. This adjustment takes into account the uncertainty in economic conditions and the possible effects of exchange rate volatility.
Despite the downgrade, B&M has indicated that the adjusted earnings expectation for FY25 is likely to revert in the following fiscal year. The company’s guidance suggests a potential reversal of these adjustments in FY26, pointing to a temporary impact on their financials.
The price target adjustment and rating downgrade by Goldman Sachs are responses to the latest financial guidance provided by B&M. These changes reflect the analyst’s assessment of the retailer’s near-term prospects in light of the updated earnings forecast and broader economic uncertainties.
In other recent news, B&M European Value Retail SA has garnered attention with notable developments. Morgan Stanley (NYSE:MS) has upgraded B&M’s stock rating from Underweight to Equalweight, setting a new price target of £3.10. This adjustment comes amid expectations of strategic changes within the company that could lead to a market re-rating, despite potential earnings per share cuts. Meanwhile, Berenberg has reiterated its Buy rating on B&M, maintaining a price target of £6.30, citing the company’s strong growth and dividend strength. Berenberg highlights B&M’s consistently higher sales, margins, and cash flow compared to pre-pandemic levels, suggesting the stock is undervalued given its profit growth and cash flow generation.
B&M has historically returned approximately £1.9 billion to shareholders through dividends between 2020 and 2024, representing about 55% of its current market capitalization. Berenberg projects an annual total dividend yield of around 10%, supported by the company’s ongoing review of its corporate domicile, which could enhance flexibility in returning capital to shareholders. Morgan Stanley’s analysis reflects cautious optimism, noting that fiscal year 2026 may be a transition period with potential negative sales and dividend cuts. Both firms emphasize the importance of strategic initiatives and market confidence in driving future shareholder value.
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