On Tuesday, BofA Securities expressed a positive outlook on Koninklijke Ahold Delhaize NV, upgrading the stock from Neutral to Buy and raising the price target to €34.00 from the previous €30.00.
The securities firm expects Ahold Delhaize's "Growing Together" strategic plan to drive a 9% compound annual growth rate (CAGR) in earnings per share (EPS) over the next five years, which is 2 percentage points faster than the consensus estimates.
The upgrade reflects the firm's anticipation of Ahold Delhaize achieving a more than 3% sales CAGR and delivering consistent shareholder returns. The company's commitment to an annual €1 billion share buyback program and increasing dividends suggest that over €2 billion could be returned to shareholders annually, representing 8% of the current market capitalization.
According to BofA Securities, Ahold Delhaize's robust top-line growth is expected to safeguard underlying earnings despite the need for reinvestment. This growth is particularly significant in a market environment where disinflation could pressure like-for-like sales across the sector. BofA Securities believes that the market sentiment does not fully reflect the strong earnings growth and continued returns potential of Ahold Delhaize.
The firm's new price target of €34 indicates approximately a 15% upside potential from the current levels and is based on a projected price-to-earnings (P/E) ratio of around 12.5 times for the year 2025. This revised target and upgraded rating underscore the firm's confidence in Ahold Delhaize's strategic initiatives and financial prospects.
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