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On Wednesday, Mizuho (NYSE:MFG) lowered its price target for Nomad Foods Ltd (NYSE:NYSE:NOMD) to $24 from the previous $28, while keeping an Outperform rating on the shares. According to InvestingPro data, the stock appears undervalued at current levels, with analysts maintaining a strong buy consensus.
The adjustment reflects a cautious stance due to dis-inflationary trends and potential macroeconomic pressures in Western Europe, which may impact consumer confidence and economic activity.
Nomad Foods' retail sales have been positively responding to increased and more effective marketing strategies. The company's focus on distribution and innovation is anticipated to bolster volume growth and product mix in 2025, while operational efficiencies are expected to support EBITDA growth from its current level of $546.26 million.
Despite these positive factors, the current economic environment suggests limited pricing power for the company. InvestingPro subscribers can access detailed financial health metrics and 8 additional ProTips for deeper analysis.
The financial forecasts for Nomad Foods have been revised, with FY25 organic sales growth projections lowered to 2.3% from 3.3%, and FY25 EBITDA growth estimates adjusted to 4% from the previously expected 6%. This conservative approach takes into account the challenges in realizing net savings, especially considering the potential for increased reinvestment in the "Lift & Launch" distribution expansion initiative.
The revision in the company's H2 FY24E EBITDA to €295 million from €300 million, marking a 15% year-over-year increase, is also a result of the anticipated reinvestment. The new price target of $24 is based on approximately 9.5 times the CY25E EBITDA, which represents a 10% discount compared to U.S. Food industry valuations.
Mizuho maintains a positive outlook on Nomad Foods, considering it a top pick in the SMID value category despite the updated estimates and price target. The firm suggests that the balance of risks versus their revised projections is skewed to the upside.
Supporting this view, InvestingPro data shows the company trading at an attractive P/E ratio of 13.5x with a strong free cash flow yield of 12%. For comprehensive analysis, including Fair Value estimates and growth projections, investors can access the detailed Pro Research Report available on InvestingPro.
In other recent news, Nomad Foods Limited has reported a slight increase in net revenues, reaching EUR 770 million, and a 0.3% organic growth for the third quarter of 2024. This marks the company's ninth consecutive quarter of organic sales growth. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) saw a year-over-year increase of 19%, while adjusted earnings per share (EPS) jumped 28% to EUR 0.55.
Despite challenges posed by an upgrade to its Enterprise Resource Planning (ERP) system, the company remains dedicated to brand investment and foresees continued organic sales growth into 2025. Deutsche Bank (ETR:DBKGn) has adjusted its price target for Nomad Foods to $22 from the previous $23, reaffirming a Buy rating.
The bank now expects an organic growth of 1.4%, a gross margin of 29.6%, an EBIT margin of 14.9%, earnings per share (EPS) of €1.74, and an EBITDA of €559 million for the company in 2024. These are the recent developments for Nomad Foods Limited.
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