Investing.com -- Shares of Sodexo (EPA:EXHO) dropped by over 8% on Tuesday following disappointing first-quarter results for fiscal year 2025.
The company reported organic growth of 4.6%, falling short of the consensus forecast of 5.3%.
Despite reiterating its full-year outlook, which still targets organic growth between 5.5% and 6.5%, the weaker-than-expected start to the year has raised concerns among investors.
“In that sense, we will look for clarification on the expected growth acceleration, especially as we would expect 2Q to be soft again, requiring a meaningful step-up in 2H which looks ambitious in current context,” said analysts at Jefferies in a note.
While the FY25 guidance remains intact for now, there is growing uncertainty surrounding the trajectory of the business, especially with the second quarter expected to remain soft.
This further intensifies concerns about the company’s ability to deliver a meaningful step-up in growth during the second half of the year, which some see as an ambitious target given the current market environment.
With these factors in play, analysts suggest that a weak stock reaction to the results is likely, reflecting investor skepticism over the company's ability to meet its projected growth targets.
“We think this vindicates our approach of incorporating SotP into our valuation methodology, capturing the lower multiples of international FM peers,” said analysts at RBC Capital Markets in a note.
"Longer term investors may be reassured by the confident H2 outlook,” RBC added.