Compass moves south after Credit Suisse downgrade

Compass Group slumped after Credit Suisse (CS) downgraded the catering company's stock to ‘underperform’ from ‘neutral’ and trimmed its target price to 1050p from 1,100p.

The Swiss bank said it saw further risks to the group’s fast growing and emerging (FG&E) market and lower growth since Compass issued a cautious outlook for its commodity exposed business on 29 July.

Compass, which supplies foodservice, cleaning, property management and support services, has warned of lower 2016 growth outlook for its FG&E business where 45% of revenues are linked to the commodity sectors, CS analysts noted.

“Our regression analysis shows those revenues are 98% correlated with mining/oil capex, so recent incremental capex reductions suggest downside risks for 2016 and 2017,” they said.

Organic growth assumptions and underlying earnings per share forecasts were lowered by 2%, partly offset by foreign exchange fluctuations, meaning its 2016 and 2017 EPS forecasts are now 4-6% below the consensus.

Shares in Compass were down 2.95% to 1,086p at 1015 GMT.