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Investing.com -- Shares of Danish facility services provider ISS A/S (CSE:ISS) jumped over 11% on Thursday, following the company’s announcement of a share buyback program.
The jump in stock price was primarily driven by investor enthusiasm over the planned repurchase of DKK 2.5 billion worth of shares, with the possibility of additional buybacks later in the year.
The stock rally reflects strong market confidence in ISS’s capital allocation strategy, which remains in line with the company’s leverage guidance range of 2-2.5x.
The buyback initiative is part of ISS’s broader financial framework, which includes maintaining a dividend payout policy between 20-40%.
Beyond the share repurchase program, ISS has maintained positive commercial momentum, particularly as businesses continue to seek strategic outsourcing solutions to improve employee engagement and operational efficiency.
Analysts at Morgan Stanley (NYSE:MS) note that while ISS’s growth trajectory will be largely driven by pricing adjustments, organic growth for 2025 is expected to settle around 5%, at the midpoint of the company’s guidance range.
A key factor in ISS’s results has been its “above-base” work, which played a significant role in exceeding 2024 organic growth projections.
This category of work was notably boosted by hurricane-related services delivered in the U.S. during the fourth quarter of 2024.
However, management does not anticipate a structural shift in client contracting behavior, suggesting that above-base contributions may not be a long-term growth driver.
ISS is trying to lessen the impact of rising national insurance costs on its profits by adjusting prices and becoming more efficient.
They are also waiting for the result of a legal case about the DTAG contract, which could give them DKK 600 million.
Morgan Stanley analysts think that if ISS gets this money, they might be able to give even more back to their shareholders.
Despite strong market reaction to the buyback plan, Morgan Stanley maintains an "underweight" rating on ISS, citing risks such as exposure to slower-growth developed markets and ongoing labor cost pressures.