Last Update 18 Dec 25

ARMK: Delayed Contract Starts Will Support Stronger Earnings Momentum In Fiscal 2026

Analysts have trimmed their price target on Aramark to $44 from $49, reflecting expectations for strong underlying momentum but a near term zig zag in revenue and margins as client driven contract start delays shift more growth into FY26.

Analyst Commentary

Street research indicates that the recent price target reduction reflects adjustments to the timing of expected growth rather than a reset of the long term thesis.

Bullish Takeaways

Bullish analysts highlight that core operating trends remain solid, with client demand and contract wins supporting a multi year growth runway despite short term noise.
The maintained positive rating is seen as a signal that execution on large contracts and cost discipline should support margin expansion as delayed starts roll into FY26.
Analysts see the revised price target as aligning valuation with a more realistic revenue ramp, potentially improving risk reward as execution visibility improves.
Longer term, the staggered start of contracts is viewed as creating a more durable growth profile, with a thicker backlog underpinning revenue and earnings beyond FY26.

Bearish Takeaways

Bearish analysts remain cautious that client driven delays in Corrections, Workplace Experience, and Healthcare could signal ongoing timing volatility, complicating near term forecasting.
The zig zag revenue and margin pattern being modeled into estimates raises concern that quarterly results may remain choppy, which can pressure the valuation multiple.
There is some worry that repeated timing slippage, even if client driven, could be interpreted as an execution overhang and limit upside until trends normalize.
Analysts note that, with more of the growth now pushed into FY26, the stock is increasingly reliant on flawless delivery against the updated ramp, which heightens downside risk if further delays emerge.

What's in the News

Issued fiscal 2026 revenue guidance of $19.55 billion to $19.95 billion, including about $100 million benefit from foreign currency translation (Corporate guidance).
Board approved a 14% increase to the quarterly dividend to $0.12 per share, payable December 17, 2025, to stockholders of record on December 5, 2025 (Dividend announcement).
Launched Aramark SeniorLife+ Consultative Services, offering AI enabled, data driven support for self operated senior living communities across dining, facilities, and supply chain (Product announcement).
Expanded the IN2WORK reentry program with a new culinary track and support website, enabling incarcerated individuals to earn nationally recognized culinary credentials and access post release career resources (Program announcement).
Invested in RoboEatz Autonomous Robotic Kitchen technology alongside ABB Robotics and WellSpan Health, deploying robotic, 24/7 customizable meal solutions integrated with Aramark POS and supply chain systems (Strategic alliance).

Valuation Changes

Fair Value: unchanged at approximately $44.60 per share, indicating no shift in the intrinsic value estimate.
Discount Rate: risen slightly from about 9.83% to 9.88%, implying a modest increase in the required return or perceived risk profile.
Revenue Growth: edged up marginally from roughly 6.19% to 6.20%, reflecting a slightly more optimistic long term growth assumption.
Net Profit Margin: risen slightly from about 3.13% to 3.14%, signaling a modest improvement in expected profitability.
Future P/E: dipped fractionally from roughly 21.80x to 21.78x, reflecting a very small reduction in the valuation multiple applied to forward earnings.

Winning major multi-year contracts and expanding internationally is driving revenue growth, diversification, and greater stability across key sectors and regions.
Technology investment and innovative, health-focused offerings are boosting margins and positioning Aramark to meet changing consumer demands for sustained earnings growth.
Rising labor costs, changing work trends, high client concentration, and intense competition threaten Aramark's revenue stability, growth prospects, and margin expansion.

Catalysts

About Aramark

Provides food and facilities services to education, healthcare, business and industry, sports, leisure, and corrections clients in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Accelerating wins of large, multi-year contracts-particularly in Sports & Entertainment, Education, and Healthcare-as organizations turn to outsourcing non-core services, point to sustained, above-trend future revenue growth and long-term contract expansion.
Expansion in international markets, with double-digit organic growth in regions like the U.K., Chile, and Spain, and strategic wins in healthcare and entertainment sectors, demonstrates a deliberate move to diversify and lower cyclicality, which should bolster overall revenue and earnings stability.
Strong trends in higher education and K-12 segments, with record client retention rates (97%+), robust net new business, and elevated participation/meal plan volumes, align with secular growth in global education enrollment and urbanization-supporting ongoing top-line growth momentum.
Significant investments in technology and AI-for dynamic menu planning, supply chain efficiency, and contract management-are driving measurable margin expansion, with AOI increasing 60 bps year-over-year, and expected to continue boosting net margins and profitability over time.
Increasing client demand and success in implementing innovative, health-conscious, and culturally-tailored food service concepts (e.g., campus hospitality transformation, plant-based/ethical offerings) position Aramark to capture incremental revenue streams tied to changing consumer priorities and sustainability, supporting long-term earnings growth.

Aramark Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Aramark's revenue will grow by 7.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 2.0% today to 3.2% in 3 years time.
Analysts expect earnings to reach $695.7 million (and earnings per share of $2.61) by about September 2028, up from $361.7 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.5x on those 2028 earnings, down from 27.9x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
Analysts expect the number of shares outstanding to decline by 0.42% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.28%, as per the Simply Wall St company report.

Aramark Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent labor cost pressures, including higher medical claims expenses and increasing prescription drug costs (e.g., GLP-1s), could compress Aramark's already-thin operating margins, particularly as labor remains a significant portion of total costs.
Elevated exposure to unionized and semi-unionized labor in segments such as Sports & Entertainment increases the risk of labor disruptions or strikes, especially as automation and technology adoption grows-potentially leading to short-term revenue interruptions and longer-term cost escalations.
A continued shift toward remote work and greater workplace automation, even if partially offset by recent B&I and refreshment growth, poses a structural risk to Aramark's core on-site foodservice business, especially in corporate and business settings, constricting top-line growth opportunities over time.
Client concentration in cyclical sectors like Education and Sports & Entertainment exposes Aramark to demographic changes and economic downturns which could reduce contract volumes, leading to increased revenue volatility and potentially impacting earnings stability.
Ongoing industry competition-both from global players and nimble regional upstarts-combined with an elevated emphasis on price competitiveness (noted by management's commitment to not using price as a lever for retention), may fuel incremental pricing pressure, threaten contract renewals and new business wins, and ultimately limit both revenue growth and net margin expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $45.1 for Aramark based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $49.0, and the most bearish reporting a price target of just $34.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $21.9 billion, earnings will come to $695.7 million, and it would be trading on a PE ratio of 22.5x, assuming you use a discount rate of 10.3%.
Given the current share price of $38.45, the analyst price target of $45.1 is 14.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Sports, Education And Healthcare Wins Will Expand Global Reach