Morgan Stanley Downgrades Aramark; What Are Other Analysts Saying?

Aramark ARMK dropped 3 percent on Monday, after Morgan Stanley downgraded the stock from Buy to Equal-weight. However, all of the ratings that research firms gave it over the latest quarter were positive, as the company stands among the top specialty eateries stocks on the NYSE and the NASDAQ in terms of EPS growth forecast for the next five years.

Analyst Ratings

In late December, Barclays reiterated its Overweight rating on Aramark and raised its price target from $32 to $37.

Moreover, after the company announced better-than-expected FYQ4 revenue with strong outlook for 2015 on November 12, several analysts issued confident recommendations. JP Morgan maintained an Overweight with a $35 price target,while Bank of America reiterated a Buy accompanied by a $33 price target, arguing that “Aramark is executing well and should continue to benefit from the global trend in food & support services outsourcing.”

With the stock trading below $30, the upside potential surpasses 10 percent in the worst of the assumptions.

Related Link: Aramark Analyst Roundup On Q4 Results

What Will Drive Aramark’s Stock Price Going Forward?

Most analysts are betting on margin expansion driven, among other things, by cost savings from productivity initiatives. Valuation is another factor that investors are taking into account; according to Morgan Stanley analysts, the stock “trades at discount to CPG despite faster growth and looks cheap on Sum-of-the-Parts.”