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21 Jul, 2021 14:39 21 Jul, 2021 15:39

Jefferies upgrades catering groups Compass, Sodexo to 'buy'

compass, food

Jefferies upgraded catering groups Compass and Sodexo on Wednesday to ‘buy’, from ‘hold’ and ‘underperform’ respectively, as it argued that the risk/reward was now more favourable.

The bank said reopening uncertainty has propelled caterer shares back to post-Covid relative lows.

"However, balance sheets were de-risked last year and first-time outsourcing has emerged more rapidly than expected so industry revenue is likely to be bigger at next peak."

Jefferies noted that Compass and Sodexo shares have underperformed the Stoxx 600 by almost 20% over the last three months and now sit close to lows reached in the immediate aftermath of the pandemic.

"Although the latest variants cloud recovery, developments have been positive: 1) de-risked balance sheets insulate from an uncertain trajectory; 2) first-time outsourcing by clients has accelerated; 3) according to our analysis of the reopening plans of the 100 largest US colleges/universities, 90-95% of students will attend in-person classes this Fall; 4) our proprietary US sports stadia footfall index has increased sharply over the past month."

The bank lifted its price target on Compass to 1,660p from 1,440p and on Sodexo to €85 from €70.


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Pilling and Co Stockbrokers Ltd. is not responsible for the content or accuracy of third party news articles and we may not share the views of the author or publisher.

We provide third party news for your convenience and information only and make no representation or endorsement whatsoever and hereby exclude all liability for any loss or damage that may be incurred by you as a result of your access or use. Please note that third party content may be subject to terms and conditions imposed by the third party owner of that content.