Pernod Ricard: Credit Suisse notes 'margin upside potential'
(CercleFinance.com) - Maintaining its buy rating ("outperform") on the stock of the French spirits group Pernod Ricard, this morning Credit Suisse has upped its target price for the stock from 150 euros to 155 euros, after the American activist investment fund Elliott took a stake in the group.
Admittedly, "The timing of Elliot's stake in Pernod appears strange," Credit Suisse notes, "given the criticism of its lack of operating leverage, M&A track record and corporate governance were all valid before the 40% increase in the share price of the past two years and subsequent valuation re-rating to a premium (relative to peers, expected.) as the company is now generating best-in-class 6% organic growth."
"Nevertheless, we believe there is margin upside potential," Credit Suisse adds - especially in Europe - where its operating margin is 440 basis points lower than Diageo's.
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The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
Admittedly, "The timing of Elliot's stake in Pernod appears strange," Credit Suisse notes, "given the criticism of its lack of operating leverage, M&A track record and corporate governance were all valid before the 40% increase in the share price of the past two years and subsequent valuation re-rating to a premium (relative to peers, expected.) as the company is now generating best-in-class 6% organic growth."
"Nevertheless, we believe there is margin upside potential," Credit Suisse adds - especially in Europe - where its operating margin is 440 basis points lower than Diageo's.
Copyright (c) 2018 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.