Citi has raised its price target on Collins Foods Ltd (ASX:CKF) to A$9.12 from A$8.77, an increase of 4%, while keeping a neutral recommendation on the stock. The broker also nudged its earnings forecasts for fiscal years 2027 and 2028 up by 1% each after reviewing the company's latest sales disclosure.
Collins Foods reported that total company sales were up 6.6% in the first 17 weeks of fiscal 2027 compared with the same period a year earlier. Citi said the sales update supported modest upward revisions to its earnings profile, but the brokerage retains reservations over several operational questions.
Skepticism on German operations
Citi highlighted concerns around Collins Foods' Germany business. While Germany figures prominently in the company’s growth blueprint, Citi noted that sales productivity in the region remains weak. That weakness prompted the broker to question the degree to which German expansion will contribute reliably to group-level earnings growth.
Questions over Australian growth sustainability
On the Australian front, Citi flagged uncertainty about the sustainability of recent growth initiatives. Management has been pursuing measures aimed at offsetting labor inflation and rising costs of goods sold, including menu innovations and other actions. Citi said it is unclear whether these initiatives will deliver durable margin relief or sustained top-line benefits.
Market context and stock performance
Citi’s neutral stance stands in contrast to the broader analyst community. According to LSEG data cited by the broker, 12 analysts collectively maintain an average buy rating on Collins Foods with a mean price target of A$10.50. Meanwhile, Collins Foods shares have fallen 19.7% year-to-date.
The broker’s incremental earnings upgrades and higher price target reflect the early sales momentum but stop short of a more positive rating given the flagged execution risks in Germany and the open question over the longevity of Australia-focused cost and menu measures.
Analyst note - Citi increased EPS assumptions for FY27 and FY28 by 1% each. The brokerage continues to weigh the reported 6.6% year-on-year sales increase in the first 17 weeks of FY27 against ongoing productivity and margin pressures in specific markets.