Shore Capital sees upside at Bunzl ahead of H2 recovery

(Sharecast News) - Bunzl's share price was up 5% on Tuesday after a solid first-half report from the distribution company, with broker Shore Capital reiterating a 'buy' stance on the stock. Results for the six months to 30 June were slightly below estimates, with a 0.8% increase in revenues to £5.75bn missing Shore Capital's forecast by around 1% or £60m.

Underlying revenues were flat, while the EBIT margin fell 100 basis points over last year to 7.0%. However, "the problem areas in North America and higher costs in Europe are being addressed", said analyst Robin Speakman.

With the company set to resume its share buyback - "a sign of confidence", according to Speakman - Shore Capital maintained a positive view on the stock and kept its forecasts unchanged, with Bunzl's management guiding to a stronger second half.

"Bunzl's asset allocation commitment to create shareholder value remains unchanged, ensuring/leveraging financial strength. So, we expect to see the impact of the resilient business model delivering recovery through H2F, noting the free cash flow yield of still 7.1% for this year, rising to 9.2% for FY26F in our forecast model," the analyst said.

As for Bunzl's valuation, the stock is currently trading at an enterprise value-to-EBITDA multiple of 8.8, though Shore Capital's fair value estimate of 3,040p implies a 2026 EV/EBITDA of 9.9x.

By 1217 BST, the stock was up 5.1% at 2,506p.