On Monday, Bunzl (OTC:BZLFY) Plc (BNZL:LN) (OTC: BZLFY), a multinational distribution and outsourcing company, received an upgraded rating from RBC Capital. The firm shifted its stance on Bunzl from "Sector Perform" to "Outperform," accompanied by a new price target set at £40.00.
"We see BNZL's increasingly positive earnings outlook, underpinned by organic margin expansion, M&A and share buybacks, as undervalued vs. 'defensive growth' peers," analysts at the firm said.
RBC Capital's optimism is further bolstered by Bunzl's consistent history of delivering above-average earnings per share (EPS) growth and high return on invested capital (ROIC). The firm's confidence is also tied to Bunzl's M&A strategy, which is perceived to be robust, and an organic profit outlook that looks promising, especially considering the company's past performance and potential for further margin improvements.
The analyst also highlighted the geographic revenue distribution of Bunzl, noting that over 55% of its revenue comes from North America. This is viewed as an advantageous position, especially when considering the defensive nature of the markets Bunzl operates in.
The potential for Bunzl to exhibit multifaceted positive earnings momentum in these markets is seen as a rationale for a reduced discount rate compared to its 'quality growth' peers, such as Compass Group (LON:CPG) and Diploma Plc.
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