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Investing.com - Mizuho (NYSE:MFG) lowered its price target on Nomad Foods Ltd (NYSE:NOMD) to $20.00 from $23.00 on Monday, while maintaining an Outperform rating on the stock. The company currently trades at $15.47, near its 52-week low of $14.87, with InvestingPro analysis indicating the stock is currently undervalued.
The price target reduction follows Nomad Foods’ second-quarter revenue miss, which Mizuho attributed to unfavorable hot weather that created a 200 to 300 basis point drag on sales. The firm estimated that approximately 30% of EBITDA upside versus their model came from smaller than expected advertising spend. Despite recent challenges, the company maintains strong fundamentals with an attractive P/E ratio of 9.9x and a substantial free cash flow yield of 18%. (InvestingPro subscribers can access 8 additional key insights about NOMD’s valuation metrics.)
Mizuho reduced its adjusted EBITDA forecast for fiscal year 2025 to €537 million from €572 million previously, and cut its fiscal year 2026 estimate to €550 million from €600 million. The new price target of $20 represents approximately 8 times Mizuho’s calendar year 2026 EBITDA estimate, a 20% discount compared to U.S. food peers.
The firm noted that reductions to FY25 guidance were disappointing for both sales and EBITDA, with approximately 75% of the sales decline attributable to weather conditions, while EBITDA was impacted by larger input cost increases. These factors extend the timeline for potential valuation multiple improvement.
Despite these near-term challenges, Mizuho expressed continued optimism for EBITDA acceleration into fiscal year 2027, citing larger innovation/renovation initiatives and a new cost efficiency program at Nomad Foods. Management’s confidence is evidenced by aggressive share buybacks, though InvestingPro data shows 4 analysts have recently revised their earnings expectations downward. For comprehensive analysis including Fair Value estimates and detailed financial health scores, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Nomad Foods Limited reported its second-quarter earnings, surpassing analyst expectations. The company posted adjusted earnings per share of €0.40, which was €0.02 higher than the anticipated €0.38. Despite this earnings beat, Nomad Foods’ revenue for the quarter was €747 million, falling short of the consensus estimate of €770.67 million. This represented a 0.8% decrease compared to the same period last year. Additionally, the company experienced a 1.1% decline in organic revenue, with a 1.0% drop in volume. These recent developments highlight the challenges Nomad Foods is facing in the current market environment.
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