Compass Group Earnings: Closes Out the Year Strongly

Narrow-moat Compass Group’s fiscal 2023 results are nothing to be sniffed at. Organic revenue growth was just shy of 20%, with EPS up a third year over year, which just highlights the degree to which the business capitalized on the attractive market conditions of the last 12 months. However, the Nov. 20 negative share price reaction would suggest otherwise, something we attribute to inflated investor expectations for 2024. Management guided to high-single-digit organic revenue growth and operating margin expansion, but clearly, investors had been hoping the tailwinds of 2023 would be enough to maintain double-digit growth for the foreseeable future. We see modest upside to our GBX 2,250 fair value estimate.