Analysts up expectations for SSP Group, price bit toppy for some

Barclays has upped its target price for SSP Group to 700p after the travel food outlet operator's encouraging first-quarter update.

Continued positive momentum was music to Barclays' ears, with SSP's management upgrading full year guidance for expected contract win growth to 4%, leading to "attractive" compounding for total shareholder return.

First-quarter results showed like-for-like sales in line but net contract gains up 8.1%, which was well ahead of previous full year guidance of 3%.

This contract win upgrade, coupled with a small upgrade from the recently announced acquisition of Stockheim Group, and a small forex downgrade means that Barclays full year earnings before interest and tax forecast increases 3% to £181m and for earnings per share increases 2.3% to 22.5p.

"The compounding TSR upgrade story continues," analysts said, having only recently upgraded SSP to 'overweight' from 'equal weight', saying that while the headline valuation metrics seemed high, a premium multiple was justified as we expected earnings upgrades and cash returns to lead to compounding total shareholder return.

Analysts at Canaccord Genuity remained impressed with SSP but retained their 'sell' rating on valuation grounds. The analysts upgraded their EPS forecasts by 5.7% to 22.8p for 2018, 7.3% to 25.6p for 2019 and by 9% to 28.7p for 2020.

Canaccord upped its target price to 570p from 450p but retained the negative recommendation on valuation grounds, adding "the stock remains vulnerable to any market pull-back, in our view".