Bunzl PLC's (LSE:BNZL) stronger first-half margin performance and new £500 million share buyback prompted a positive read-through from brokers, though both Jefferies and Panmure Liberum remain cautious on the shares.
Panmure Liberum noted that adjusted operating profit of £440.6 million, up 8.9%, was ahead of its £431 million forecast, while Jefferies similarly highlighted a better-than-expected margin performance.
Underlying revenue growth of 3.2% was broadly as anticipated following Bunzl’s June trading update, with North America benefiting from both volume growth and inflation. Group operating margin increased 30 basis points to 7.3%.
The main change to the outlook was Bunzl’s expectation that the full-year operating margin will now be broadly flat year-on-year at 7.6%, rather than slightly lower.
Jefferies described that as a “slight upgrade” and noted it was broadly consistent with current market expectations, while Panmure Liberum believes the combination of improved guidance and the buyback could drive a mid-single-digit percentage increase to forecasts.
Panmure currently models around 3% underlying sales growth for the full year and operating profit of £925.1 million, broadly in line with FactSet consensus, which ranges from £904 million to £948 million.
Both brokers also focused on Bunzl’s decision to return another £500 million to shareholders over the next 12 months.
Jefferies calculated the programme at roughly 5.5% of Bunzl’s market capitalisation, while Panmure said the capital return should support a positive reaction to the results. Acquisition activity is also starting to build, although only two deals have been completed so far this year.
That was not enough to change either broker’s recommendation.
Panmure Liberum retained its 'sell' rating and 2,050p target, noting Bunzl shares have risen around 35% this year and trade at approximately 15 times forecast 2026 earnings against a 10-year average of 17 times.
Jefferies is more cautious still, maintaining an 'underperform' rating and 1,900p price target.
The common thread is that while the results, guidance and buyback were all supportive, neither broker sees enough improvement in the underlying growth profile to become more constructive on valuation.
