On Thursday, Bernstein SocGen Group shifted its stance on shares of Whitbread PLC (LON:WTB:LN) (OTC: WTBCF), raising the stock from Market Perform to Outperform and increasing the price target to £33.00 from £31.40.
The hospitality giant, known for its hotel and restaurant brands, has seen its shares decline by 22% year-to-date, leading to what the firm describes as a record low price-to-earnings (PE) ratio of less than 12 times for an expected 12% earnings per share (EPS) growth.
In their assessment, Bernstein SocGen Group acknowledges that Whitbread remains a relatively low return on capital employed (ROCE) stock and maintains its position on the company's property upside potential. Nonetheless, the firm anticipates that the market has already accounted for a potential guidance downgrade.
Moreover, they note that revenue per available room (RevPAR) has stabilized since the last report, and the company is likely to benefit from easier second-half comparisons as well as decelerating inflation rates.
The analyst firm expects that if Whitbread maintains its full-year outlook, it will be positively received by investors. Furthermore, they express a renewed admiration for the brand's product, which they consider the best-reviewed hotel brand within its price range. This high customer satisfaction, according to Bernstein SocGen Group, not only secures Whitbread's position within the UK market but also bolsters the belief in the company's potential for international expansion.
Whitbread's stock performance contrasts with the broader market's downturn, as investors may be recognizing the inherent value and growth prospects despite the general economic headwinds. The company's ability to hold its full-year views amid market challenges could signal a resilient business model and operational efficiency.
In summary, the upgrade reflects a valuation call based on the current low PE multiple against the backdrop of expected earnings growth. Bernstein SocGen Group's revised outlook suggests confidence in Whitbread's market position and its ability to capitalize on both domestic and international opportunities in the hospitality sector.
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