The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
On Tuesday 16 June Whitbread is due to post its first-quarter figures. These figures will follow relatively closely behind the firm’s full-year releases where the adjusted earnings per share was £2.137 and the total annual sales were £2.6 billion with the market consensus that it would be able to grow that by just over 10% in the year ahead. Due to structural changes being implemented by the business, the £463.8 million pre-tax profit for the year 2015 is expected to be able to grow by almost 18%.
These strong expectations for the business are confirmed by the 14 buy recommendations from institutional analysts, along with nine holds and only two sells. The average price target the 25 firms that follow the company are looking at is £56.14, which still leaves a 12.25% premium yet to be gained.
The biggest question hanging over Whitbread at the moment is how will the new CEO Alison Brittain settle in when she starts in January 2016. An extensive background in banking prior to this is no guarantee of success. At the moment the business continues to lead the way in the two sectors it is focused on, with Costa Coffee continuing to gain market share while Premier Inn dominates the discount hotel market. An example of how well regarded Whitbread is held, can be seen by Goldman Sachs including it in its list of companies most attractive for mergers and acquisition activity.
The shares have been in an aggressive upward trajectory for some time and since breaking through the £20 level back in the summer of 2012, have seen the share price increase by 150% in three years. The management changes will be a lot to absorb but arguably the current softness in the shares is an opportunity for investors rather than a change in direction.