3 Compelling Reasons to Keep Aramark Stock on Your Radar

Key Points

• After a difficult period during COVID-19, food and facilities services provider Aramark had a strong run in 2024.
• The company's 2017 purchase of procurement services business Avendra has helped to strengthen its supply chain; with the recent launch of Avendra International and the purchase of Spanish firm Quantum Cost Consultancy, investors might expect further improvements on a global scale.
• Avendra's financial performance has been strong overall, and its balance sheet allowed it to recently increase dividend payments and launch a share repurchase program.

The size of the U.S. hospitality industry as of the start of 2025 is estimated at more than $247 billion, and that figure is expected to surge to nearly $314 billion in the next five years. Aramark NYSE: ARMK is one of the major players in the food and facilities services section of the hospitality space, providing service to customers in the education, healthcare, business, government, and sports industries.

Like many other hospitality companies, Aramark faced unprecedented challenges during COVID-19, and the company's stock plunged as a result. Through early 2024, shares of ARMK failed to achieve the highs they had reached prior to the pandemic. Over the past year, the stock has surged 26.6%, consistently reaching new all-time highs.

Though shares of Aramark tapered a bit in the final weeks of 2024 and into the start of the new year, there are plenty of reasons to be bullish on the company behind the food services at a host of hotels, universities, hospitals, sports stadiums, and other major venues across the country. Indeed, analysts expect that Aramark shares still have room to rise. Nine out of 11 analysts who have recently reviewed the company rate it a Buy, and they have collectively set a consensus price target of $42.59, for upside potential of more than 16%. Below, we take a closer look at some of the reasons Aramark may be worth considering in 2025.

Avendra Expands to a Global Scale

Aramark acquired procurement services provider Avendra in 2017 for more than $1 billion. At the time, Avendra managed about $5 billion in annual purchases for hundreds of hospitality companies across the United States. The acquisition is widely seen as having improved Aramark's supply chain management, allowing it to operate more efficiently and improve margins.

With rapid growth in Avendra's footprint in recent years, Aramark announced in September 2024 that it would launch Avendra International to further expand the reach of its procurements arm. Given Aramark's existing business in 15 countries, Avendra International is expected to utilize some $20 billion in procurement power. Investors may want to watch how this expansion continues to impact Aramark's margins and other performance metrics as Avendra International continues to get up and running this year.

Quantum Cost Consultancy Purchase to Accelerate Supply Chain Business Growth

Launching Avendra International is only one step in Aramark's procurement and supply chain business development. In December, the company announced that Avendra International had acquired Spanish procurements consultant the Quantum Cost Consultancy Group. Quantum's involvement in the European and Caribbean markets and its roughly half a billion dollars in customer spend are likely to accelerate Avendra's expansion on the international stage.

While some hiccups in the transition may be expected, Aramark seems to prioritize quick integration of Quantum into Avendra's existing operations: Quantum's operational structure and leadership remain in place.

Performance Is Strong, With Positive Forward Signals

As Avendra's operations continue to grow internationally, investors might expect Aramark to continue improving its margins by leveraging scale to achieve better deals on various items. This should only help to improve Aramark's overall performance further.

In its fourth-quarter fiscal 2024 earnings report in November, Aramark reported adjusted EPS of 54 cents, beating analyst predictions. Revenue climbed by 5% year-over-year, slightly behind expectations, though international sales growth of 9% was a high point and a positive indicator for potential future growth as Avendra International expands.

Importantly, for a large business like Aramark, a strong base business in both the North American and international markets helped drive this growth. The company expects organic growth to continue at an accelerated pace this year. Aramark set fiscal 2025 guidelines of 7.5% to 9.5% organic revenue growth, with adjusted EPS gains expected at 23% to 28%.

An improvement in the overall balance sheet has also allowed Aramark to increase its quarterly dividend to $0.105 from $0.095 and to launch a $500-million share repurchase program. Both of these should help benefit investors over the short term and over a longer timeframe.