Among the major Australian stocks, Collins Foods Limited (AU:CKF) has received mixed reviews from analysts following the release of its FY24 results earlier this week. The company generated higher revenues and earnings, leading to improved dividends. Overall, analysts predict 24% upside potential in the share price.
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Post-results, CKF stock gained over 6% on Tuesday this week. Year-to-date, the stock is trading down by 25%.
Collins Foods operates, manages, and oversees restaurants across Australia, Europe, and Asia. In Australia, the company manages KFC and Taco Bell restaurants.
Highlights from Collins Foods’ FY24 Results
For the full-year Fiscal 2024, Collins Foods reported a 10.4% year-over-year increase in revenue from continuing operations, totalling AU$1.48 billion. The company also witnessed same-store sales (SSS) growth across all its business units, with KFC Australia experiencing a 3.8% increase in SSS and Taco Bell Australia growing by 3.5%.
Meanwhile, underlying NPAT (net profit after tax) from continuing operations increased by 15.6% to AU$60 million.
Additionally, the company’s results ticked the box for income investors, with a fully franked final dividend of 15.5 cents per share. This led to a total dividend for FY24 of 28 cents per share, up from 27 cents paid in the previous fiscal year.
Despite its strong results, Collins acknowledged cost-of-living pressures and weak consumer sentiment in its primary market, Australia.
Analysts’ Ratings
After the results, Macquarie reduced its price target on the stock by 14% to AU$10.8 while maintaining a Hold rating. The broker feels that the company’s margins are likely to stay under pressure in FY25. That said, they foresee medium-term growth opportunities through M&A and moderating cost pressures. Macquarie has reduced its earnings forecasts for FY25-27 by 2.3% to 7.3%.
On the other hand, UBS analyst Tim Plumbe has upgraded his rating from Hold to Buy on the stock. Plumbe also raised his price target from AU$10.95 to AU$11.5, predicting an upside of 21%. He emphasized that the company’s results surpassed market expectations significantly despite a challenging consumer environment. This highlights its resilient performance. Moreover, Plumbe highlighted several catalysts for future growth, such as strong market positions in Western Australia and Queensland, competitive pricing for market share gains, and an expansion strategy.
Is Collins Foods a Good Buy?
According to TipRanks, CKF stock has received a Moderate Buy consensus rating based on five Buys, three Holds, and one Sell recommendation. The Collins Foods share price target is AU$11.16, which is 24% above the current trading level.
