Jefferies upgrades ISS, Adecco; cuts Ashtead, Hays; reveals top and bottom picks

Investing.com -- Jefferies reshuffled its ratings across the European Support Services sector, upgrading ISS and Adecco while downgrading Ashtead and Hays, citing shifts in earnings momentum, valuation and commercial trends, in a note dated Thursday.

The brokerage upgraded ISS to “buy” from “hold,” raising its price target to DKK240 from DKK170. 

The analysts said the company’s improving contract momentum, particularly a large U.K. government win and 15 new agreements worth more than DKK100 million each, underpinned stronger organic growth prospects. 

“Improving commercial momentum we think can drive an acceleration in organic growth to 5-6% from FY26, while the outlook for FCF generation remains strong,” the brokerage said. 

ISS shares are up 35% this year, but Jefferies said valuation remains attractive at 10.5 times 2026 earnings with a 10% free cash flow yield. 

The brokerage added that a pending resolution in a contract dispute with Deutsche Telekom could provide “the next potential catalyst.”

Adecco was lifted to “hold” from “underperform,” with its price target raised to CHF24 from CHF18.50. 

The analysts cited stabilizing consensus earnings estimates after months of downgrades, reflecting a rebound in temporary hiring volumes. 

“Adecco estimates revision momentum has been largely stabilising over the last few months with consensus EPS broadly stable, and contrasting with the sharp cuts experienced till May (c.-20%),” the brokerage said.

By contrast, Hays was cut to “hold” from “buy,” with its target reduced to 61p from 85p. 

Jefferies pointed to steep earnings downgrades and weakness in permanent placements that showed no sign of improvement. 

“Hays, on the other hand, has been the only one in the sector with the last earnings round triggering further cuts, with the perm business happening to further deteriorating through May and June, and no signs of improvement in July,” the analysts said.

Ashtead was also downgraded to “hold” from “buy,” with its price target lowered to 5,700p from 5,900p. 

The analysts said the stock had rallied more than 30% in six months on optimism for a U.S. non-residential construction recovery, but warned that near-term fundamentals did not support further gains. 

“ We think activity/rate recovery is already now likely priced in, while potential margin disappointment limiting earnings momentum points to a more balanced risk-reward, in our view,” the analysts said.

Jefferies reiterated its preference for the testing and inspection names, calling Intertek and Bureau Veritas the most attractive in the group. 

The analysts said their growth and margin outlook “seem underappreciated” and that muted share price performance offered an opportunity.

Jefferies kept Randstad at "buy" with a price target of €45, calling it the preferred staffing stock in the sector on improving temporary hiring volumes.

The brokerage also updated its sector preferences. Its most favored stocks now include Bureau Veritas, Intertek, Elis, Compass, Experian and ISS. The least preferred remain Bunzl, Securitas, Sodexo, Eurofins and Mitie.

Jefferies said earnings momentum remained the key driver of stock performance in the sector. 

The analysts cautioned that while share prices had generally held up, revision trends remained negative for most companies. 

ISS and Adecco stood out as beneficiaries of improving sentiment, while Ashtead and Hays were seen as facing structural and cyclical headwinds.