On Friday, UBS analysts, led by Joshua Chan, revised their price target for Bright Horizons (NYSE:BFAM) shares to $130.00, down from the previous $148.00, while maintaining a Neutral rating. Currently trading at $116.81, the company carries a notable P/E ratio of 58.4x, according to InvestingPro data. The adjustment comes as the firm anticipates the company to report an in-line quarter with a more normalized and moderate growth rate in its Full Service segment.
Bright Horizons is expected to potentially guide its earnings per share (EPS) for 2025 above the Street's midpoint predictions, due to margin expansion from a favorable tuition-wage gap, growth in Backup Care services, and profitability initiatives in the UK. The company has demonstrated solid performance with 12.7% revenue growth in the last twelve months, and InvestingPro analysis indicates a "GOOD" overall financial health score. However, UBS analysts also foresee that the company's revenue growth guidance for 2025 might be slightly below the midpoint of market expectations. This is attributed to the normalization of Full Service growth and foreign exchange (FX) challenges as significant factors.
The UBS team suggests that while the upcoming quarterly results could be in-line or slightly positive, the overall growth expectations for Bright Horizons might be adjusted downward. The analysts note that despite the stock's reduced valuation, it currently lacks a clear catalyst that would drive its performance forward.
Chan commented on the company's outlook, stating, "We expect an in-line quarter for BFAM, with a more normalized/moderate growth rate in Full Service continuing (but now in expectations). For 2025 guidance, we expect the company to possibly guide EPS above the Street at midpoint, driven by margin expansion due to a favorable tuition-wage gap, Backup Care growth, and UK profitability initiatives."
He further noted potential challenges, "Tempering, we think 2025 revenue growth guidance could come in slightly below the Street at midpoint, with normalizing Full Service growth and FX being key headwinds. Net, the quarter could be an in-line to slightly positive event, though with growth expectations potentially nudging lower, the stock even at reduced valuation is missing a catalyst in our view."
Investors and market watchers will be keeping an eye on Bright Horizons as it navigates these growth and profitability expectations against the backdrop of market headwinds. With analyst price targets ranging from $102 to $160, and the stock currently appearing slightly overvalued according to InvestingPro's Fair Value analysis, investors seeking deeper insights can access comprehensive valuation metrics and 10+ additional ProTips through InvestingPro's detailed research reports, available for over 1,400 US stocks.
In other recent news, Bright Horizons Family Solutions Inc. has reported robust financial performance, underlined by an 11% increase in third-quarter revenue for 2024, reaching $719 million. The backup care segment played a significant role in this growth, witnessing an 18% rise in revenue to $202 million. The adjusted earnings per share (EPS) also saw a 26% growth, hitting $1.11. The company has refined its full-year revenue guidance to approximately $2.675 billion and adjusted EPS to a range of $3.37 to $3.42.
Bright Horizons also successfully amended its senior secured credit facilities, introducing a new term "B" loan facility totaling $583.5 million, aimed at reducing the outstanding principal amount of the previous loans. This financial restructuring is expected to provide the company with an improved interest rate scenario, potentially leading to cost savings.
In terms of analyst ratings, Baird upgraded Bright Horizons from Neutral to Outperform with a new price target of $140. BMO Capital Markets raised the rating from Market Perform to Outperform, adjusting the price target to $125. Goldman Sachs maintained its Buy rating and increased its price target to $162 from $142, recognizing the company's robust performance.
The company's Full Service childcare segment showed a mixed outcome with a 9.4% revenue growth, falling short of the company's guidance. Looking ahead, Bright Horizons has narrowed its revenue guidance for this segment to the lower half of the prior range for 2024. The company expects continued low single-digit enrollment growth and projects that price increases will taper from 5% to around 4% in 2025. These are the recent developments in the company's performance and outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.