Ahold Delhaize Reports Another Strong Quarter With Guidance Higher but in Line With Our Estimates

Koninklijke Ahold Delhaize released third-quarter results with sales up 4.6% at EUR 18.5 billion versus 18 billion for company-compiled consensus. Comp sales growth was up 2.9% and down 0.2% for U.S. and Europe, respectively, better than the 0.1% and down 0.5% estimates for company compiled consensus. Online sales growth across regions continued to be strong (up 52.9% in the U.S., 30.6% for the group), reflecting the group's resilience and solid presence in the channel. The underlying operating margin for the group was 4.4% or EUR 812 million (versus EUR 748 million for consensus, primarily driven by U.S.), down 20 basis points, a function of tough comparisons from unusually high operating leverage from last year due to COVID-19. In terms of guidance, the group raised its EPS growth (versus 2019 comparison base) outlook for the year to the 21%-25% range (versus 29% in our model and mid- to high-single-digit growth guidance previously), and free cash flow expectations (to EUR 1.7 billion from EUR 1.6 billion), while it reiterated guidance on capital expenditures ( EUR 2.2 billion versus EUR 2.3 billion in our model) and share buybacks (EUR 1 billion, in line with our estimates). Given our EPS estimates were already ahead of both consensus and guidance, we don't expect to materially change our EUR 24.5 fair value estimate. Shares trade in 2-star territory.