Ahold Delhaize shares jump on strong Q3 results and €1 bln buyback plan
Investing.com -- Shares of Ahold Delhaize (AS:AD ) were up 5% on Wednesday after the company reported a strong set of third-quarter results, exceeding analysts' expectations across both its European and U.S. operations.
The retail giant posted group net sales of €22 billion, surpassing the consensus estimate of €21.91 billion, and underlying operating income of €855 million, ahead of the €837 million analysts had forecasted.
This was primarily driven by a 6% beat in Europe, while results from the U.S. came in line with expectations. The group’s operating margin of 3.9% also slightly outpaced analysts’ predictions.
In the U.S., the company saw comparable sales grow by 1.2%, beating expectations of 1.0%.
Although performance was dampened slightly by the ramp-down of operations at 32 S&S stores and the recall of Boar’s Head deli products, the U.S. segment held steady with net sales of €14.83 billion, surpassing forecasts.
A non-recurring pre-tax charge of $136 million affected reported EBIT, but the company’s underlying operating margin remained at 4.2%, in line with consensus.
In Europe, Ahold Delhaize’s performance exceeded expectations, with comparable sales rising 1.6%, outpacing the forecasted 1.0% increase. Net sales in the region totaled €8.50 billion, ahead of the consensus estimate of €8.38 billion, and the company’s underlying operating margin of 3.9% also slightly outperformed expectations.
The company cited a recovery in Belgium, driven by a change in its operating model, as a key contributor to the region’s strong performance. However, reported EBIT was lower by €101 million, largely due to costs related to the company’s Belgium Future Plan.
Despite the positive results, analysts at UBS, pointed out that expectations for the U.S. market were slightly higher, particularly with regards to the cost of investments related to the company’s S&S stores, which could impact future margins.
However, Ahold Delhaize maintained its full-year guidance, forecasting a group underlying operating margin of at least 4.0%, in line with consensus.
Free cash flow for the year is expected to be around €2.3 billion, slightly above consensus, while capex is forecasted at about €2.2 billion.
The company also announced a €1 billion share buyback program, set to begin in 2025.
“We expect ~4% margin for the Group next year to be met, with incremental upside from volume recovery in the US / European margin expansion to continue to be cycled through price investments in StopNShop, keeping EPS revisions broadly stable,” said analysts at Morgan Stanley (NYSE:MS ) in a note.
Source: Investing.com
