Sodexo Earnings: Negative Momentum Continues; Shares Fall on Weak Free Cash Flow

Narrow-moat Sodexo delivered first-half results in line with recently reduced guidance, growing organic revenue by 3.5% and expanding margins by 10 basis points. However, weak free cash flow combined with negative momentum in the stock led to shares falling 7% in early trading. We are lowering our fair value estimate 5% to EUR 80 from EUR 84 after receiving additional information on Sodexo’s guidance decrease. Shares remain undervalued.