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On Wednesday, UBS analyst Joshua Chan adjusted the price target for ARAMARK Holdings (NYSE:ARMK) shares, reducing it to $45.00 from the previous $46.00. Despite this change, the firm continues to recommend ARAMARK stock with a Buy rating. According to InvestingPro data, the stock appears slightly undervalued at its current market capitalization of $10.15 billion, with analysts setting price targets ranging from $38.43 to $49.00.
Chan explained the rationale behind the new price target, stating that it is based on a consistent 12X next twelve months (NTM) enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple. This valuation is applied to their updated December 2026 estimated EBITDA of approximately $1.46 billion, which is a slight decrease from the former estimate of $1.47 billion. InvestingPro analysis shows the company currently trades at an EV/EBITDA of 13.24x, with last twelve months EBITDA at $1.19 billion.
The analyst highlighted that the target multiple remains above ARAMARK’s historical average of 10X due to the company’s ongoing margin recovery. However, it is still below the multiple of ARAMARK’s competitor, Compass Group (LON:CPG), which typically trades at around 14X. This difference is attributed to Compass’s historically stronger growth and margins compared to ARAMARK. InvestingPro data reveals ARAMARK’s current gross profit margin stands at 15.42%, with six analysts recently revising their earnings expectations downward.
The revision of the price target comes as ARAMARK continues its efforts to improve its financial performance. The company’s management has been focused on driving margin recovery, which has been a key factor in UBS’s assessment and continued support of the stock with a Buy rating.
Investors and market watchers will be keeping a close eye on ARAMARK’s progress in the coming months, as the company works towards achieving its financial targets and improving its market position relative to its peers.
In other recent news, Aramark reported its first quarter earnings and revenue, which fell short of analyst estimates. The company posted adjusted earnings per share of $0.39, missing the projected $0.48, and revenue of $4.55 billion, below the consensus forecast of $4.62 billion. Despite this, Aramark’s Q1 revenue saw a 3% year-over-year increase, and the company noted record adjusted operating income for a first quarter in its Global Food and Support Services segment.
Aramark’s CEO, John Zillmer, expressed commitment to the company’s strategic priorities, aiming to drive profitable top-line growth, accelerate adjusted operating income growth, and leverage its capital structure. The company reaffirmed its full-year fiscal 2025 outlook, projecting organic revenue growth of 7.5% to 9.5% and adjusted earnings per share growth of 23% to 28% compared to fiscal 2024.
In addition, Aramark reported its highest revenue for any quarter in Global FSS history, with foodservice revenue up 5% and organic foodservice revenue increasing 6%. Operating income jumped 30% year-over-year to $217 million, while adjusted operating income rose 13% to $258 million. The company also commenced share repurchases as part of its previously announced $500 million buyback program, repurchasing over 645,000 shares for approximately $25 million to date. These are part of the recent developments surrounding Aramark.
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