Compass remains a 'key sector pick', says Investec

27th Mar 2014 11:44

Investec has reiterated its 'buy' stance and 1,050p target price for catering giant Compass, saying that the stock remains a "key sector pick" after its second-quarter trading update.Compass said that organic revenue growth for the first half ending March 31st will be "just over 4%", which Investec said implies a "slightly improving trend from the February 6th statement (+4%)". This growth, the broker estimates, would have also benefitted from the timing of Easter which now falls in the second half, compared with the first half the previous year."Against easier second-quarter comparatives therefore, the over-4% organic revenue growth rate in the first half looks a solid outturn," Investec said."We expect the delivery of consistent and impressive returns to continue, with a projected free cash flow compound annual growth rate to 2017 of 13% supporting solid income (3% yield), buybacks (ongoing 2014 £500m programme) and a potential uptick in M&A. The stock was down 0.2% at 927p by 12:29.BC