Credit Suisse gave a knock to Bunzl PLC's (LON:BNZL) shares on Thursday, downgrading its rating for the blue-chip business supplies distributor to ‘underperform’ from ‘neutral’ following last month’s trading update.
The move came as the Swiss bank cut its price target for the FTSE 100-listed firm to 2,100p from 2,450p after reducing its earnings per share estimates by 3%-6% for 2019 to 2021. In late morning trading, Bunzl shares were down 1.2% at 2,252p.
READ: Bunzl hit by weak retail market as underlying revenue growth slows
In a note to clients, Credit Suisse’s analysts pointed out that Bunzl’s update warned of slowing growth, particularly in North America, its biggest market, and also said the rate of underlying revenue growth had slowed during the first quarter.
The analysts said, in its view, a combination of limited organic growth and falling underlying margins should more than offset the on-going opportunity for the group to grow its business via M&A.
They added that Bunzl’s revenue growth and margins will be further constrained through 2019 by weakness in product input costs.
The analysts said they also see potential pressure on volumes for the group’s existing key clients, which will in turn put further pressure on pricing discussions.