UPDATE: Morgan Stanley Initiates Coverage on Aramark

In a report published Tuesday, Morgan Stanley analyst Jamie Rollo initiated coverage on Aramark ARMK with an Overweight rating and $29.00 price target. According to the report, as major productivity initiatives are underway, ARMK is experiencing margin improvement, narrowing the gap with main peer Compass. An upside to the shares exists if it can exceed its target of +20 bps per year of margin expansion, which is seen as likely. “Aramark is a leading provider of food, facilities, and uniform services across the globe. It is #2 in North America and has a top three position in most markets in which it operates,” the report noted. “Various cost saving initiatives aimed at driving margin gains are underway. Management targets 20 bps of margin growth/ year, but it could be higher. Some key debates from the report included: -Is a target of 20 bps of annual margin savings achievable? -Is the outsourcing market still attractive? -Is the market correctly valuing Uniforms? ARMK closed Friday at $24.51.