Elis stock jumps 5% as 2024 results meet targets, new buyback announced

Investing.com -- Shares of Elis Services SA (EPA:ELIS) jumped more than 5% on Thursday following its full-year 2024 results, which came in line with analyst expectations and company guidance. 

The French textile and hygiene services provider reported revenue of €4.57 billion, reflecting an organic growth rate of 5.2%. 

EBITDA rose by 9% year-over-year to €1.61 billion, maintaining a 35.2% margin, while operating profit climbed 7% to €733 million.

The company’s financial performance benefited from favorable pricing across all regions, driven by wage inflation and productivity gains. 

Elis also secured several large contracts throughout the year, further bolstering its margins. Free cash flow after leases came in at €346 million, up 14% from the previous year and surpassing guidance of just above €340 million. 

Leverage was reduced slightly to 1.85x, with management expecting it to trend toward 1.8x in the coming year.

Alongside its earnings report, Elis announced a new capital allocation strategy to increase shareholder returns.

The company plans to pursue bolt-on acquisitions worth between €50 million and €150 million annually while continuing to reduce debt and maintaining its investment-grade credit rating. 

It also announced a €150 million share buyback program for 2025, equivalent to roughly 3% of its market capitalization. 

“This clear and consistent capital allocation framework will be taken well today in our view, given recent share price volatility and investor pushback regarding large M&A in the US,” Morgan Stanley said in a note.

Elis is confident about its growth trajectory through 2025. Revenues are expected to grow organically by approximately 4%, with modest increases in EBITDA, EBIT, net income per share, and free cash flow. 

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According to consensus estimates, revenue will reach €4.8 billion, EBITDA will reach 35.5%, and operating profit will reach €782 million, implying 16.3% EBIT. By the end of the year, Elis expects a leverage ratio of around 1.75x.

Morgan Stanley analysts described the results as "solid," reaffirming their "overweight" rating on the stock. 

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