RBC Capital Markets has lifted its price target on Diploma PLC (LSE:DPLM), the FTSE 100 specialist distributor, to 7,300p from 6,600p, while Deutsche Bank has raised its target to 7,200p from 6,400p, after first-half results significantly beat expectations on both organic growth and margins.
Both brokers rate the stock a 'buy'.
Diploma reported organic revenue growth of 15% in the first half, well ahead of RBC's 12% forecast and Deutsche Bank's 11% estimate, with reported revenue rising 17% to £851 million, 3% above consensus.
Operating margins expanded by 300 basis points to 24.5%, driving a 33% increase in adjusted operating profit to £208.9 million and a 36% jump in adjusted earnings per share to 109.2p.
RBC analyst Andrew Brooke raised his 2026 and 2027 earnings per share forecasts by 6% and 8% respectively, reflecting the stronger first half, recent acquisitions and upgraded full-year guidance from management.
Deutsche's David Brockton noted the results were 7% ahead of his earnings forecast and 2% above consensus, with the company prompting another upgrade to full-year guidance following a material upgrade as recently as March.
The Controls division was the standout performer, with profit growth of 45%, driven by International Controls, which includes the Peerless business, growing organically at 32%.
Free cash flow conversion came in at 76%, comfortably ahead of typical first-half phasing, while net debt to EBITDA fell from 1.1 times to 0.8 times and return on tangible capital employed rose 360 basis points to 22.7%.
RBC's 7,300p target comprises roughly 5,500p for the core business and 1,800p for the value of future acquisitions, assuming £300 million a year in bolt-on deals at an average multiple of eight times operating profit.
The broker cautioned that with the shares up around 30% this year, further re-rating may be difficult given Diploma now trades on a similar valuation to other quality compounders.
However, RBC sees continued earnings upgrade potential from acquisitions, where the near-term pipeline is described as encouraging, and noted management's historically conservative approach to guidance.
The stock trades on roughly 28 times RBC's current-year adjusted earnings estimate of 236.9p, falling to 26 times the 2027 forecast of 252.2p.