Credit Suisse has downgraded its rating for blue-chip business supplies distributor Bunzl PLC (LON:BNZL) to ‘neutral’ from ‘outperform’ amid concerns over margin pressure.
The Swiss bank also cut its target price for the FTSE 100-listed firm to 2,450p from 2,600p, with the shares currently trading at 2,421p, down 1.5% on Thursday’s close.
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In a note to clients, Credit Suisse’s analysts said they see Bunzl as a stable, cash generative business that can combine low single-digit organic growth with accretive and value creative M&A as it consolidates its fragmented end markets
However, they added, they expect that the group’s underlying earnings (EBITA) margins will continue to decline driven by rising operational costs and large sophisticated clients.
The analysts said they estimate Bunzl’s underlying margins to fall by 24 basis points in 2019 compared to a 30 basis point decline in 2018.