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On Tuesday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Nomad Foods Ltd (NYSE:NOMD), raising the price target from $24.00 to $26.00 while reiterating an Outperform rating on the company’s stock. The upgrade follows the stock’s strong recent performance, with InvestingPro data showing robust returns over the last month. This revision reflects a positive assessment of the company’s fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA), which outperformed expectations due to increased productivity gains and successful market share expansion initiatives.[Discover 10+ additional exclusive insights and real-time metrics for Nomad Foods with InvestingPro, including detailed valuation analysis and growth projections.]
Nomad Foods’ recent financial results showcased a significant improvement in gross margins, attributed to heightened productivity that contributed an additional 160 basis points compared to approximately 90 basis points in both the second and third quarters. The company’s strong financial position is further evidenced by its profitable operations over the last twelve months and attractive free cash flow yield, according to InvestingPro analysis. Mizuho analysts highlighted this trend as a key factor in supporting the company’s multi-year EBITDA growth, which has been somewhat overlooked by the market.
The research firm expressed confidence in Nomad Foods’ ability to continue this positive trajectory, citing the company’s aggressive product renovation and innovation planned for the fiscal year 2025. Early successes in market share growth, stemming from the "Lift & Launch" distribution strategy, were also noted as encouraging signs of the company’s potential. The established brand equities in existing product categories are expected to aid in the introduction of adjacent products.
Looking forward, Mizuho has adjusted its EBITDA estimates for Nomad Foods, forecasting €587 million for fiscal year 2025, up from the previous estimate of €579 million. The firm also anticipates a 5% year-over-year increase in EBITDA for fiscal year 2026, estimating it at €618 million.
The revised price target of $26.00 is based on approximately 10 times the projected calendar year 2025 EBITDA, which represents a 10% discount compared to U.S. Food peers. While currently trading at a relatively low earnings multiple, InvestingPro data indicates the stock is trading at a high P/E ratio relative to near-term earnings growth. This valuation adjustment is directly tied to the stronger financial base established in fiscal year 2024 and the anticipated EBITDA growth.[Access the comprehensive Pro Research Report for Nomad Foods, along with 1,400+ other top stocks, exclusively on InvestingPro. Transform complex financial data into actionable insights for smarter investment decisions.]
In other recent news, Nomad Foods Ltd reported its fourth-quarter 2024 earnings, surpassing expectations with an adjusted earnings per share (EPS) of €0.42, compared to the forecasted €0.38. The company’s revenue reached €793 million, slightly above the anticipated €792.81 million, marking a 4.3% increase from the previous year. Analysts from Jefferies maintained a Buy rating with a $24 price target, emphasizing the positive outcomes of Nomad Foods’ reinvestment strategies and supply chain improvements. Barclays (LON:BARC) also increased the price target to $23, maintaining an Overweight rating, reflecting optimism about the company’s potential mergers and acquisitions. Nomad Foods has shifted focus back to mergers and acquisitions, exploring potential "under the radar" acquisitions to enhance innovation and growth. The company has seen a return to volume growth and increased gross margin flexibility, which has bolstered its financial position. With a free cash flow yield of around 10% and a healthy balance sheet, Nomad Foods is well-positioned for future growth investments, according to analysts. These developments indicate a strong performance trajectory for Nomad Foods, backed by effective strategic initiatives and financial health.
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