Barclays has a strong appetite for food services company Compass Group PLC (LSE:CPG), indicating the group is well placed to ride out the coming inflationary storm.
The broker lists Compass as its preferred leisure pick with signs that it is better placed to ride out turbulence this year.
It noted that while no leisure groups had material direct exposure to the sanctions induced by Russia’s invasion in Ukraine, most had macro-related risks.
“Against that backdrop, Compass stands out as well sheltered, with limited top-line sensitivity (c2% volume risk) and a track record of successfully passing on inflation, while also being a beneficiary of higher levels of outsourcing, which is being catalysed by high inflation,” Barclays said.
“We can't exclude the possibility that the current spike in input costs can hurt the group's margins in coming months, but we expect any setback would be short-term and would come against a backdrop where we were previously seeing significant (revenue-led) upside risks to consensus both in 2022 and in '23/24 (our 2024 forecasts are 8% ahead of consensus).”
Barclays placed an overweight rating on Compass price target of 2000p, around 23% upside from yesterday’s closing price of 1620p, while its industry outlook was negative.
Compass shares were up 3.4% to 1,675p by 12:40 GMT.