Berenberg lowers target price on Whitbread

Berenberg said it was reducing its estimates for Whitbread due to the impacts of the UK budget on costs and to reflect the current trading environment implied by peer Travelodge's Q3 results.

However, while Berenberg lowered its price target on the stock, it remains bullish on the medium-term outlook for Whitbread and still expects strong benefits from its Accelerating Growth Plan. It also anticipates seeing Whitbread's German operations to continue to take shape, and the cash-flow generation of the business to fund material shareholder returns.

"We remain bullish on Whitbread's long-term prospects. We expect long-term benefits from the AGP, while the profitability inflection from Germany, as well as cost efficiencies and organic growth, provide scope for material PBT expansion and cash-flow generation over the coming years," said the German bank, which reiterated its 'buy' rating on the stock.

Berenberg also noted that supply "remains tight" and that it believes could tighten further, supporting revenue per available room over the coming years.

Reporting by Iain Gilbert at Sharecast.com