Whitbread share price: Costa Coffee business may beat expectations

By: Tsveta van Son
Tsveta van Son
Tsveta van Son is part of Invezz’s journalist team. She has a BA degree in European Studies and a… read more.
on Feb 10, 2016
Updated: Oct 21, 2019

Whitbread’s (LON:WTB) Costa Coffee business has the potential to beat expectations, according to Morgan Stanley’s analysts. On Monday, the bank put an ‘overweight’ rating and 5,100p price target on the FTSE 100-listed group.

Morgan Stanley remarked in a note to clients that Whitbread was trialling Costa Collect — a pay and collect app which could be “transformational” — and an improved food offer. The food capture rate is 60-70 percent at the group’s Fresco trial site versus the 42 percent Costa estate average. Whitbread had also recently increased prices and is considering differential pricing, Morgan Stanley said. It added that Costa also had untapped demand, with only around 20 percent of its UK stores at full capacity, suggesting upside from additional sites. “We estimate around £80m EBIT from these, +50% to Costa’s EBIT, with our forecasts only capturing expansion and 3% like for like sales,” the bank projected.

However, Morgan Stanley trimmed its 2017-2019 earnings per share forecasts by around five percent due to weak London hotel trading post Paris attacks and dull high street trading for Costa. The bank said that it assumed £10 million extra operating costs and around two percent like-for-like sales and revenue per available room in the fourth quarter of 2016 and the full year 2017.
Whitbread’s share price has risen today. As of 14:44 GMT, the stock was changing hands at 3,803.00p, 2.78 percent up intraday. The FTSE 100 benchmark index had meanwhile climbed 0.27 percent to 5,647.53 points.
As of 14:55 GMT, Wednesday, 10 February, Whitbread plc share price is 3,803.00p.

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