Compass Stock Price Sinks 20% On Profit Warnings

Shares of Compass Group (LON:CPG) fell around 20% this morning in London after the catering giant issued a profit warning. As a result, the price action now trades at a 6-year low below the £9 handle.

Fundamental analysis: Profit lower, jobs in jeopardy

Compass Group announced it expects first-half profits to be £125 million to £225 million below expectations. The company earned £951 million pounds in the same period a year ago.

Last month, Compass said it expects to grow between 4% and 6% in 2020, a forecast which has now been slashed to anywhere from 0% to 2%.

The catering industry has been hit hard by closure of schools, offices, cultural, and sports events in Europe and other parts of the world. Compass provides food for office workers, armed forces, and school children in 45 countries around the world.

Besides profit warnings, Compass warned last year that hundreds of jobs are in jeopardy due to the global economic slowdown. The coronavirus outbreak will now severely impact the catering business as many major companies around the world implement “work from home” policies.

Analysts from JP Morgan expect Compass’s full-year operating profit to be 12%lower.

Technical analysis: Multi-year lows

Shares of Compass Group are down almost 50% this month on a mouth-watering slump. Just a few months ago, in September, Compass stock price printed record highs above the £21.50 handle.

As seen in the chart, the price action broke through the 100-MMA near the £12.50 handle, and is now approaching the ultimate support in the context of the 200-MMA at £8.09. This confluence of support levels, located between £8.09 and £9.30 may play a crucial role for the price developments in the coming weeks and months.

Summary

Shares of Compass Group are down 20%, totaling monthly losses to nearly 50% amid the coronavirus outbreak. This morning, the catering giant issued a profit and growth warning which fueled a major selloff in London.