Can Bunzl (LON:BNZL) bounce back from its recent lows following Thursday’s pre-close trading update?
Things were going very well for the distribution and outsourcing firm in the first half of 2017. From an opening price of £21.24 the stock rose to a record high of £24.71 in mid-May. This climb was in large part down to February’s full year figures, with Bunzl posting a weak pound-boosted 16% jump in adjusted pre-tax profits to £478 million, and April’s Q1 statement, where the company revealed an 18% increase in revenue thanks its acquisition-splurge.
Yet Bunzl’s fortunes began to change from June onwards. An update at the end of that month, with constant exchange rate revenue growth of 7% for the first half of the year and news of 3 fresh acquisitions, failed to get investors back on board. And though it did creep back to £23.50 across August, the firm’s interim results – with adjusted pre-tax profits up 18% to £248.3 million (or 5% at constant exchange rates) – soon reversed this rebound as it claimed trading in the UK and Ireland was ‘subdued’.
October’s Q3 statement did little to change things for Bunzl, even if it did post an 11% rise in group revenue, again aided by its rampant M&A action. The stock then suffered a real blow in early November, with a note from Morgan Stanley (NYSE:MS) sending it more than 6% lower in a single session after the broker claimed Bunzl is at risk from Amazon’s business-to-business marketplace. The company hasn’t been able to recover since, with Bunzl now sitting at a 12 month nadir of £20.59.
It’s hard to see what Bunzl can do to turn things around, given that investors haven’t been particularly receptive of late to its pretty solid updates. Another set of double digit growth may help reassure the market about the supposed threat from Amazon (NASDAQ:AMZN).
Bunzl PLC has a consensus rating of ‘Hold’ with an average target price of £22.99.
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