Credit Suisse hails Compass's outlook in US, cash return potential

Credit Suisse bumped up its target price on Compass's shares, highlighting the company's strong organic growth in developed markets, especially in the US.

Following the catering and support services company's third quarter update, the Swiss broker emphasised its organic growth of 6% in developed markets.

That stood in stark contrast to rivals such as Sodexho, which had recently guided market expectations for 2017 and 2018 lower, the broker said, labelling Compass's execution "impressive".

Credit Suisse was particularly encouraged by the firm's execution in the American market, which led it to leave its estimate for 7% growth at Compass in 2018 unchanged.

It also pointed out the fact that the company's competition was in 80% of the instances made up of smaller players and self-ops, which were at a disadvantage.

That, Credit Suisse said, underpinned Compass's medium-term growth outlook.

Finally, Credit Suisse reiterated Compass's "attractive" cash return potential penciling in forecasts for dividends worth £3.1bn and share buybacks of £4.1bn between 2018 and 2022, which equated to about 28% of its market capitalisation.

The recommendation on the shares was thus kept at 'outperform' but after rolling-forward its target on the heels of the recent share consolidation took the target price was lifted from 1,750p to 1,870p.