On Monday, Hays Plc (LSE:HAS) (OTC:HAYPF), a prominent recruitment firm, received a downgrade on its stock rating from BNP Paribas (OTC:BNPQY) Exane. The firm's analyst cited multiple factors for this decision, including an unchanged cost base amidst challenging market conditions and a significant disparity in expected earnings compared to consensus estimates.
The downgrade shifts Hays Plc's rating from Neutral to Underperform, reflecting a bearish outlook on the company's near-term performance. This change in rating is primarily due to the company's decision to maintain its cost base to protect its network, which, according to the analyst, will result in material negative operational leverage.
BNP Paribas Exane has also revised its price target for Hays Plc, moving it down to GBP0.87. This adjustment comes as a response to the analyst's observation that market conditions have not shown improvement through the third quarter. The firm's updated earnings per share (EPS) forecasts for the fiscal year 2025 are now 42% below the consensus, indicating a more cautious stance on the company's future earnings potential.
The analyst also expressed concerns regarding Hays Plc's mid-term outlook. These concerns include the company's lack of free cash flow (FCF) generation, structural challenges in its German market, and growing obstacles in the technology sector. These factors contribute to the analyst's decision to downgrade the stock and lower the price target.
In summary, BNP Paribas Exane has taken a negative view on Hays Plc, anticipating that the company will face continued headwinds. The firm's analyst points to operational leverage issues, overly optimistic consensus cost estimates, and structural market challenges as key reasons for the downgrade to Underperform and the reduction in the price target to 87p.
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