On Tuesday, Morgan Stanley reiterated its Equalweight rating and EUR88.00 price target for Brenntag AG (BNR:GR) (OTC: BNTGY) stock.
Brenntag's second-quarter results matched revenue and gross profit expectations, with figures reaching €4,176 million and €1,028 million, respectively.
The company's operating EBITDA and EBITA outperformed consensus estimates by 3-4%, coming in at €386 million and €297 million. Consequently, Brenntag's operating profit margin and conversion margin surpassed consensus by 20-60 basis points.
Despite these strong performance indicators, Brenntag's profit before tax (PBT) and earnings per share (EPS) fell short of consensus by 9-10%, impacted by additional special cost items related to strategic investments and projects.
Free cash flow (FCF) also experienced a significant year-over-year decline of 62%, totaling €333 million, primarily due to working capital outflows and increased payments for property, plant, equipment, and leases.
From a divisional perspective, Brenntag's Specialties segment reported a modest gross profit increase of 0.1% in the second quarter on a constant currency basis. This marked an improvement from the 8.3% decrease in the first quarter, with the first half of the year showing a 4.3% decrease year-over-year.
This was attributed to a lower gross profit per unit, although volumes saw a slight year-over-year increase. Specifically, the Life Science sub-segment grew by 0.9% in the second quarter, rebounding from a 6.3% decrease in the first quarter. In comparison, Material Science decreased by 0.7%, less than the 9.6% decrease in the previous quarter.
In the Essentials division, constant currency gross profit grew by 0.8% in the second quarter, an improvement from a 3.8% decline in the first quarter.
The first half of the year saw a 1.5% decline, also due to a fall in gross profit per unit across all segments. Brenntag will need to deliver €593 million in operating EBITA during the second half of 2024 to meet the midpoint of their new guidance, which is set at €1.15 billion.
InvestingPro Insights
The recent analysis of Brenntag AG (BNTGY) by Morgan Stanley highlights a mixed performance, with the company meeting revenue and gross profit expectations but falling short on profit before tax and earnings per share. To provide a broader financial perspective, InvestingPro data shows a market capitalization of $9.94 billion and a price-to-earnings (P/E) ratio of 14.67, which adjusts to 15.06 for the last twelve months as of Q1 2024. Despite a challenging environment, Brenntag's revenue for the last twelve months stood strong at $17.58 billion.
InvestingPro Tips reveal that Brenntag's management has been proactive in enhancing shareholder value, indicated by an aggressive share buyback strategy and a high shareholder yield. Importantly, the company has consistently raised its dividend for 14 consecutive years, showcasing a commitment to returning value to shareholders. With the stock trading near its 52-week low and maintaining a moderate level of debt, these factors may present an opportunity for investors seeking stable dividend-paying stocks in the Trading Companies & Distributors industry.
For those interested in a deeper analysis, InvestingPro offers additional tips on Brenntag AG, available at https://www.investing.com/pro/BNTGY, which could provide further insights into the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.