Berenberg slightly lowers target price on Compass

Berenberg said Compass was a best-in-class operator that was well-positioned to benefit in the long term from structural trends in the industry.

The German bank stated Compass' main KPIs – notably organic growth, retention rates, and net new business – were currently outperforming historical averages, something it thinks justifies optimism about a rebased higher organic growth outlook.

"While the shares are slightly down since the company's last update, we remain optimistic about the future industry trends that will benefit Compass, which, coupled with a healthy balance sheet, give plenty of opportunity for growth and cash generation," said Berenberg.

Berenberg adjusted its numbers for Compass due to its change in reporting currency from GBP to USD and 2023 full-year results but stood by its 'buy' rating on the stock.

"On an underlying basis, following the FY results, our revenue estimates move a touch down while our operating profit estimates move a touch up, reflecting the new FY24 guidance. At the bottom line, higher interest costs and a higher anticipated FY24 tax rate, as well as lower buybacks, leave our EPS estimates down by mid-single digits," said Berenberg.

"Looking ahead, we remain confident in the FY24 outlook for high single-digit organic revenue growth (Berenberg 8.5%) and operating margin progression (we forecast 6.95% for FY24)."

Reporting by Iain Gilbert at Sharecast.com