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ARAMARK Holdings (ARMK)
NYSE:ARMK
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ARAMARK Holdings
(NYSE:ARMK)60Neutral
Positive Factors
Capital Return
The company has started the process of returning capital to shareholders through a recent $500M share repurchase authorization and an 11% dividend raise.
New Business Momentum
Annualized new business wins were at a record level for the company, indicating strong underlying momentum in the business.
Negative Factors
Organic Growth Performance
Organic growth came in notably below expectations, growing 4.7% in the quarter, below MSe of 6.6%.
Retention Challenges
Retention suffered from two lower margin facilities contract losses, pushing retention to 93.2%.
ARAMARK Holdings (ARMK) vs. S&P 500 (SPY)
Market Cap
$9.42B
Dividend Yield1.13%
Average Volume (3M)2.10M
Price to Earnings (P/E)28.0
Beta (1Y)0.87
Revenue Growth-5.98%
EPS Growth-46.55%
CountryUS
Employees266,680
SectorIndustrials
Sector Strength66
IndustryCorporate Services
Share Statistics
EPS (TTM)1.27
Shares Outstanding265,104,860
10 Day Avg. Volume1,927,950
30 Day Avg. Volume2,096,059
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.54
Price to Cash Flow (P/CF)-4.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$45.56Price Target Upside26.80% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering10
ARAMARK Holdings Business Overview & Revenue Model
Company DescriptionAramark Holdings (ARMK) is a leading global provider of food, facilities, and uniform services to a wide range of clients across various sectors, including education, healthcare, business, and sports and leisure. The company is known for its comprehensive service solutions, offering everything from catering and dining services to facilities management and uniform rental and maintenance. Aramark operates in numerous countries, serving millions of people every day through its commitment to excellence and innovation.
How the Company Makes MoneyAramark makes money primarily through contracts with institutions and organizations seeking outsourced service solutions. The company's revenue streams include food services, which involve providing catering and dining management to schools, hospitals, and businesses; facilities services, which cover cleaning, maintenance, and other building management functions; and uniform services, which involve renting, cleaning, and maintaining uniforms for various industries. Key factors contributing to Aramark's earnings include long-term client relationships, strategic partnerships, and a diverse service offering that meets the needs of a broad client base. The company benefits from economies of scale and its ability to adapt its services to the specific requirements of different sectors.
ARAMARK Holdings Financial Statement Overview
Summary
Overall, ARAMARK Holdings shows a mixed financial performance. While profitability and revenue growth remain challenges, the company demonstrates improving cash flow management and a stable equity position. High leverage poses a risk, but positive cash conversion ratios and improving net profit margins provide some optimism for future performance.Income Statement
ARMK shows a mixed performance in its income statement. The Gross Profit Margin for TTM is 7.11%, which is a decrease from the previous years, indicating a squeeze on profitability. The Net Profit Margin stands at 1.94% TTM, showing improvement from 1.51% in the previous annual report. Revenue has slightly increased by 0.83% TTM, but remains volatile, having decreased from the previous year. EBIT and EBITDA margins indicate operational efficiency at 4.33% and 7.00% respectively, with slight fluctuations over the periods.68
Positive
Balance Sheet
The Balance Sheet reflects a stable equity position with Stockholders' Equity at $3.08 billion TTM. However, the Debt-to-Equity Ratio is high at 0.40, indicating significant leverage, though improved from the previous year. ROE is positive at 11.02% TTM, suggesting reasonable returns on equity despite fluctuations. The Equity Ratio is 25.45% TTM, showing moderate reliance on equity financing.55
Neutral
Cash Flow
The Cash Flow statement indicates positive Free Cash Flow growth, with a rate of 58.85% TTM. The Operating Cash Flow to Net Income Ratio is 2.34 TTM, reflecting strong cash conversion capabilities. The Free Cash Flow to Net Income Ratio is also healthy at 1.43 TTM, indicating efficient cash utilization. These metrics suggest solid cash flow management despite previous fluctuations.62
Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 17.55B | 17.40B | 18.85B | 16.33B | 12.10B | 12.83B | Gross Profit |
| 1.25B | 1.43B | 1.82B | 1.56B | 1.09B | 835.89M | EBIT |
| 760.32M | 706.51M | 862.93M | 628.37M | 191.44M | -66.32M | EBITDA |
| 1.23B | 1.17B | 1.53B | 1.16B | 580.74M | 310.67M | Net Income Common Stockholders |
| 339.61M | 262.52M | 674.11M | 194.48M | -92.22M | -461.44M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 484.15M | 714.83M | 2.07B | 329.45M | 532.59M | 2.51B | Total Assets |
| 12.71B | 12.67B | 16.87B | 15.08B | 14.38B | 15.71B | Total Debt |
| 1.24B | 5.57B | 8.63B | 7.79B | 7.83B | 9.69B | Net Debt |
| 759.81M | 4.89B | 6.66B | 7.46B | 7.30B | 7.18B | Total Liabilities |
| 9.62B | 9.63B | 13.15B | 12.04B | 11.64B | 12.97B | Stockholders Equity |
| 3.08B | 3.04B | 3.71B | 3.03B | 2.72B | 2.74B |
| Cash Flow | Free Cash Flow | ||||
| 484.63M | 726.51M | 305.02M | 329.74M | 281.74M | -187.75M | Operating Cash Flow |
| 796.44M | 726.51M | 766.43M | 694.50M | 657.08M | 176.68M | Investing Cash Flow |
| -448.73M | -160.81M | 208.91M | -831.29M | -634.39M | -361.12M | Financing Cash Flow |
| -139.50M | -1.56B | 653.65M | -37.69M | -2.01B | 2.44B |
ARAMARK Holdings Technical Analysis
Negative
35.93
Price Trends
37.53
Negative
38.28
Negative
36.44
Negative
Market Momentum
-0.60
Positive
40.95
Neutral
32.95
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARMK, the sentiment is Negative. The current price of 35.93 is below the 20-day moving average (MA) of 36.87, below the 50-day MA of 37.53, and below the 200-day MA of 36.44, indicating a bearish trend. The MACD of -0.60 indicates Positive momentum. The RSI at 40.95 is Neutral, neither overbought nor oversold. The STOCH value of 32.95 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ARMK.
ARAMARK Holdings Risk Analysis
ARAMARK Holdings disclosed 32 risk factors in its most recent earnings report. ARAMARK Holdings reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
ARAMARK Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $80.95B | 48.41 | 41.17% | 0.75% | 8.12% | 20.35% | |
78 Outperform | $25.03B | 53.69 | 37.52% | 1.22% | 10.26% | 8.47% | |
75 Outperform | $11.52B | 22.61 | 32.22% | 1.50% | 2.11% | 0.05% | |
71 Outperform | $48.02B | 25.56 | 58.98% | 0.82% | 4.19% | 6.60% | |
68 Neutral | $3.24B | 40.69 | 4.55% | 1.80% | 3.25% | -66.29% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% | |
60 Neutral | $9.42B | 28.00 | 11.46% | 1.13% | -5.98% | -46.55% |
* Industrials Sector Average
Performance Comparison
ARMK
ARAMARK Holdings
35.93
4.49
14.28%
ABM
ABM Industries
54.64
13.42
32.56%
CTAS
Cintas
203.06
48.14
31.07%
ROL
Rollins
51.78
6.63
14.68%
SCI
Service International
80.86
6.90
9.33%
GWW
WW Grainger
1,007.71
51.35
5.37%
ARAMARK Holdings Earnings Call Summary
Earnings Call Date: Feb 4, 2025 | % Change Since: -6.29% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Positive
The earnings call highlighted several positive developments including record global FSS revenue and strong AOI growth. The company showcased strategic financial actions such as debt refinancing and share repurchases, alongside successful international expansion and client retention efforts. However, challenges such as the impact of facilities exits, flooding in Spain, and inflationary pressures were noted. Overall, the positive aspects of the call outweigh the challenges.Highlights
Record Global FSS Revenue
Achieved record global FSS revenue for any quarter in Aramark's history, with organic revenue growing 5% to $4.6 billion.
Strong AOI Growth
Global FSS reached record AOI profitability for any previous first quarter, with operating income up 30% and adjusted operating income up 13% on a constant currency basis.
Debt Refinancing and Share Repurchase Program
Initiated oversubscribed debt refinancing to extend maturities and repurchased shares as part of a $500 million share repurchase program. Moody's upgraded Aramark's credit rating.
International Revenue Increase
International segment experienced 10% organic revenue growth year-over-year, led by the UK, Canada, Chile, and Ireland.
New Business and Client Retention
Strong start in fiscal 2025 with new account wins and client retention, including the retention of Arizona State University and expansion into athletics.
Lowlights
Impact of Facilities Exits
FSS US organic revenue increased by 3%, partially impacted by a 2% drag due to facilities exits.
Flooding in Spain
Severe flooding in the Valencia region temporarily affected client locations, impacting the international segment's margin by approximately 20 basis points.
Inflation and Tariff Concerns
Anticipated inflation levels in the 2% to 3% range, with potential 30 basis points increase in food costs due to tariffs.
Company Guidance
During the Aramark First Quarter Fiscal 2025 Earnings Results Conference Call, the company provided several key financial metrics and guidance. Aramark reported a record global FSS revenue of $4.6 billion, marking a 5% organic revenue growth, with the foodservice business up over 6%. The company achieved a 13% growth in adjusted operating income (AOI) on a constant currency basis, with an AOI margin of 5.6%, a 40 basis point increase year-over-year. International operations also saw a 10% increase in organic revenue, led by regions such as the UK, Canada, and Chile. Aramark anticipates organic revenue growth of 7.5% to 9.5%, AOI growth between 15% and 18%, and adjusted EPS growth of 23% to 28% for fiscal 2025. Additionally, the company initiated a $500 million share repurchase program and plans to maintain a leverage ratio of approximately 3x by the end of the fiscal year. Inflation is expected to remain favorable at 2% to 3%, and Aramark's capital structure enhancements and strategic focus on new account wins and client retention are projected to drive double-digit revenue growth in the second half of the fiscal year.ARAMARK Holdings Corporate Events
Private Placements and Financing
Aramark Holdings Announces Senior Notes Redemption Plan
Neutral
Jan 17, 2025
On January 17, 2025, Aramark Services, Inc., an indirect wholly owned subsidiary of Aramark, announced its decision to redeem the entire $551,538,000 principal amount of its 5.000% Senior Notes due 2025. The redemption, conditioned upon securing new indebtedness, will occur on February 18, 2025, at a price equal to the full principal amount plus accrued interest. In tandem with this redemption, Aramark has successfully syndicated new U.S. dollar denominated term loans amounting to $1,395 million, due June 2030. The proceeds from these loans are expected to be used for the redemption, refinancing existing loans, and covering related expenses, while maintaining a net leverage neutral position for the company.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.