An update has come out on Ahold N.V. (AHONY), in which senior retail sector analyst Duong Vuong, CFA is restating his Hold rating on the company. We excerpted the following details:
'We maintain our Hold recommendation on the stock after the company's third quarter results. The company's additional share buy-back should support the stock. The company is also to start paying a dividend again at the end of the fiscal year. At its current valuation, however, we feel that all the good news has already been factored into the stock price.
'Ahold reported third-quarter with earnings 1.9% higher on 1.1% higher sales and the company said it would resume paying an annual dividend. Earnings reached $313.7 million from $307 million in the year-earlier period. Sales reached $9.2 billion and operating profit rose 21% to $373 million from $309 million, while the retail operating-profit margin widened to 4.5% from 4%.
'For fiscal 2007, the retail operating margin should come in at the high-end of Ahold's forecast range of 4% to 4.5%. The company said it would specify the fiscal 2007 dividend when it reports results March 6.
'The stock is trading at 19.1x our 2007 EPS forecast and is in-line with the sector's median P/E. Until there is significant improvement in margins, we think that the stock will trade in-line with the market. We, therefore, maintain our Hold recommendation.'
Read the full analyst report on AHONY
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