New Targets: 10% EPS Cut for FY27, Upside By FY30

Research evidence excerpt

New Targets: 10% EPS Cut for FY27, Upside By FY30

UpdateMtransformation) over FY26-30 but most of this is in opex. On M&A, as expected the

company points towards targeted bolt-on acquisitions to build scale in priority

markets.

New Meta contract: Sodexo also announces that it has won a food services contract

with Meta across its global portfolio of over 130 locations including corporate

offices, large campuses, data centres, conference hubs and smaller office locations.

This represents one of the largest single global workplace food services contracts

secured by Sodexo to date, and we estimate could be ~1% to annual revenue

(~250m) though not all of this will hit FY27 (Aug year end). Meta was one of the

last global tech players not to outsource (Apple is still mostly self-operated,

Compass has contracts with Microsoft, Alphabet, Amazon, Nvidia and Tesla).

View: We had expected the investor day to be more of a reset event than a recovery

event, and the near-term downgrades support this. While the Meta contract is a

good sign of early delivery, the FY30 plan implies a big margin hockeystick so the

stock will remain a "show me" story, we think. Sodexo shares have rerated from 9x

to 15x NTM P/E YTD, now on 17x post this downgrade, around half of this being its

margin downgrade and half the share price rebound. The discount to Compass has

narrowed to 20% versus 40% historically, and we think this will not be a quick fix

given Sodexo's higher exposure to FM and Europe as we discussed here. We rate the

shares Underweight.

Live webcast at 2:30 pm CEST / 1:30 pm UK here.

Exhibit 1: Sodexo FY27 guidance vs Exhibit 2: Sodexo new capex/sales

MSe/consensus guidance

Guidance

FY27 CoCoCo MSe Low Mid Upper Capex/sales New guidance MSe VA