Adecco shares target cut, RBC Capital sees modest EBITA decline ahead
On Friday, RBC Capital adjusted its price target on Adecco Group AG (ADEN:SW) (OTC: OTC:) shares, a leading global staffing agency, reducing it to CHF38.00 from the previous CHF39.00. Despite the decrease, the firm maintained its Outperform rating on the stock.
The revision reflects a modest reduction in the company’s expected earnings before interest, taxes, and amortization (EBITA) for the fiscal years 2024 and 2025. RBC Capital cites a challenging market environment, a lower gross margin base, and better-than-anticipated cost management as the primary reasons for the adjustment. The firm anticipates a 2.5% decrease in EBITA for 2024 and a 5.0% decrease for 2025.
RBC Capital remains optimistic about Adecco (SIX:)’s ability to navigate the current market conditions, suggesting that the company is effectively controlling the factors within its reach. Additionally, the firm foresees potential de-leveraging through 2025 acting as a positive catalyst for the stock. This financial strategy is expected to reduce the company’s debt levels relative to its earnings.
The staffing agency’s dividend yield, which stands at 8.7%, is also highlighted as being historically high, potentially attracting investors looking for income. RBC Capital’s stance is supported by a valuation based on a 2025 enterprise value to sales ratio of 0.31 times, which suggests that there is enough potential for the stock to reach the firm’s mid-cycle target price, warranting the Outperform rating.
Adecco Group AG’s shares are traded on the Swiss Exchange and are also available over-the-counter in the United States. The company provides a range of staffing and workforce solutions across various sectors and has a global presence.
InvestingPro Insights
As investors evaluate RBC Capital’s revised price target for Adecco Group AG, real-time data from InvestingPro provides additional context for the company’s financial health and market position. Adecco’s market capitalization stands at $5.51 billion, reflecting its significant presence in the global staffing industry. The company’s P/E ratio, a key measure of its valuation, is currently at 16.77, with an adjusted P/E ratio for the last twelve months as of Q2 2024 at a lower 12.19, indicating a potentially more attractive valuation in recent months.
InvestingPro Tips highlight Adecco’s robust shareholder returns, with a high shareholder yield and a considerable dividend yield of 5.12% as of the latest data, which is in line with RBC Capital’s commentary on the appeal to income-seeking investors. Moreover, the company has a track record of maintaining dividend payments for 29 consecutive years, emphasizing its commitment to shareholder returns.
For investors seeking comprehensive analysis and additional insights, there are more InvestingPro Tips available, which delve into Adecco’s performance as a prominent player in the Professional Services industry and its profitability prospects for the year. With the company trading near its 52-week low, these insights could prove invaluable for those considering Adecco as a potential investment opportunity.
For further detailed analysis and tips, investors can refer to InvestingPro, which offers a suite of additional tips to aid in making informed decisions.
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