On Wednesday, Oppenheimer adjusted its outlook on ARAMARK Holdings (NYSE:ARMK) shares, increasing the price target to $36 from the previous $31 while maintaining an Outperform rating.
The revision followed ARAMARK's second quarter fiscal year 2024 adjusted operating income (AOI) of $187 million, which surpassed both the firm's and the Street's expectations of $180 million and $179 million, respectively. This performance was attributed to robust revenue growth, effective supply chain strategies, and tight cost control.
The foodservice company reported revenues of $4.2 billion for the quarter, aligning with projections and reflecting heightened base business volume, strategic pricing actions, and expansion through net new business.
Revenue growth was particularly noteworthy in the Food and Support Services (FSS) segments in the United States and International markets, which saw increases of 7% and 8% year-over-year, respectively.
Encouraged by the strong first half of fiscal 2024, management at ARAMARK has revised its full-year organic revenue growth forecast upward to around 9%, compared to the previous range of 7-9%. The guidance for adjusted operating income growth of 17-20% and earnings per share growth of 30-35% remains consistent with earlier projections.
In light of these positive developments, Oppenheimer has also lifted its estimates for ARAMARK's earnings before interest, taxes, depreciation, and amortization (EBITDA) for fiscal years 2024 and 2025 to $885 million and $1,024 million, up from $872 million and $982 million, respectively. The firm cites increased confidence in ARAMARK's growth trajectory as the basis for the raised price target and the continued Outperform rating.
InvestingPro Insights
Amidst Oppenheimer's positive outlook on ARAMARK (NYSE:ARMK), current metrics from InvestingPro provide additional context to investors. With a market capitalization of $8.07 billion and a P/E ratio of 11.85, ARAMARK stands as a notable entity in the market. The company's revenue for the last twelve months as of Q2 2024 stands at $19.63 billion, marking a solid 15.25% growth. However, it's important to note that the quarterly revenue growth has seen a dip of -8.74%, which aligns with the InvestingPro Tip that analysts anticipate a sales decline in the current year.
Despite this, ARAMARK has managed to maintain dividend payments for 11 consecutive years, with a current dividend yield of 1.24%. This resilience in returning value to shareholders is complemented by a gross profit margin of 16.11% over the last twelve months. While InvestingPro Tips highlight weak gross profit margins, the company's status as a prominent player in the Hotels, Restaurants & Leisure industry and the expectation of profitability this year should not be overlooked. For those seeking deeper insights, InvestingPro offers additional tips on ARAMARK's financial health and future prospects. With the use of coupon code PRONEWS24, investors can access these insights at a discounted rate on a yearly or biyearly Pro and Pro+ subscription.
Investors evaluating ARAMARK's performance and potential may find these metrics and insights from InvestingPro valuable. With 6 more InvestingPro Tips available, including expectations on net income and profitability, a comprehensive analysis is just a step away. Explore these detailed insights to make informed decisions on ARAMARK's place in your investment portfolio.
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