Compass remains a 'buy' despite first-half miss, says Berenberg

13th May 2015 10:52

Berenberg has maintained a positive view on Compass Group despite the catering giant's first-half results receiving a cool reaction from the market on Wednesday.The broker kept a 'buy' rating and 1,300p target price for the stock.Compass said sales were up 5.7% organically at £9.06bn in the first half, slightly short of the consensus forecast of £9.16bn.Nevertheless, Berenberg said Compass is still seen as a "classic growth story"."We believe that it will continue to enjoy strong organic growth, driven by the underpenetration of the outsourcing market and positive employment rates. We also expect margin improvements of c10bp a year given its disciplined cost strategy, which has driven multiyear operating leverage," analysts said.Berenberg also sees scope for "further cash repatriation to shareholders" in the year ending September 2016 which could total £500m-800m in the absence of any M&A."This keeps the company within the leverage target of 1.5x net debt/EBITDA. We expect these dynamics to support the shares and deliver outperformance," it said.Compass was trading 3.3% lower at 1,125p by 10:52.