Street View: Sodexo's profit warning dents trust as it raises as many questions as answers

Elior SA

21/03/2025 10:27

Fixes spelling of 'wary' in 9th bullet

** Sodexo cut its FY growth forecasts on Thursday citing weakness in North American business

** Sodexo shares closed 17.2% lower at 60.15 euros on Thursday, dragging the whole sector down; they edge up 1% at 1027 GMT on Friday

'WHAT'S GOING ON IN THE KITCHEN?'

** Analysts at Jefferies ask the question as the warning "highlights the long-standing structural challenges", while those at Morgan Stanley say the warning "raises as many questions as answers"

** Jefferies advises against "buying the dip" due to the lack of visibility on mgmt action plan going forward

** Morgan Stanley and Deutsche Bank both cut their stock ratings by one notch to "equal weight" and "hold" respectively, the former now having much less confidence in Sodexo's execution

** Midcap Partners notes that lower-than-expected volumes in Education may suggest a macro slowdown in the U.S.

** Berenberg adds Sodexo will need to start rebuilding market trust as early as April 4 when it reports H1 results, as the extent of the f'casts cut is more significant than expected

** Berenberg and Morningstar, however, still expect growth in mid-term, with the latter seeing the shares slump as "overreaction"

** Midcap Partners is wary of over-interpreting the impact on Elior ELIOR.PA, as the smaller peer is less U.S.-exposed and has less ambitious targets

** Jefferies sees little read-across to London-based peer Compass CPG.L citing reassuring momentum recently

(Reporting by Dimitri Rhodes)

((Dimitri.rhodes@thomsonreuters.com))