UPDATE: Wells Fargo Initiates Coverage on Aramark at Outperform, Establishes $28.00-29.00 Valuation Range

In a report published Tuesday, Wells Fargo analyst Jeff Farmer initiated coverage on Aramark with an Outperform rating, establishing a $28.00-29.00 valuation range. According to the report, ARMK's revenue growth is expected to benefit from the combination of a sizeable structural tailwind, driven by outsourcing trends and company-specific opportunities, including improved client retention rates and growing revenue from existing client relationships. “We are looking for the implementation of low-hanging standardized operational practices and procedures, and long-overdue technology investments to drive cost efficiencies across ARAMARK's food, labor, and G&A costs,” the report noted. “Over the past year, ARMK has begun to roll out what it calls the EXCEL model, which (1) employs common standards and processes across like business segments, (2) accelerates investment in operational management tools and technology, and (3) uses business-segment specific performance metrics and monitoring. With the ongoing implementation of the EXCEL model, we believe that there is an opportunity for ARMK to deliver 20 basis points (bps) of net operating income margin improvement over each of the next three years, driven by a total of $200-300 million in gross cost savings across the company's , $10 billion addressable cost structure.” ARMK closed Friday at $25.23 with shares trading up at 2.94 percent.