Jefferies keeps 'underperform' rating on Bunzl despite strong H1

Bunzl shares surged to an all-time high on Tuesday after a stronger-than-expected set of half-year results and a new share buyback programme, but that wasn't enough to change Jefferies' negative view on the stock.

Shares were up 8% at 3,470p by 1059 BST, having hit a record peak of 3,600p earlier in the session.

However, Jefferies reiterated an 'underperform' rating and 2,600p target price for the shares, which suggests a 25% drop in the stock from Tuesday's levels.

The distribution and outsourcing company announced that adjusted diluted earnings per share rose to 90.2p in the six months to 30 June, up from 87.6p previously and around 2% ahead of the consensus estimate of 88.3p,

Revenues of £5.71bn were also ahead of forecasts of £5.69bn, albeit down 3.3% year-on-year. However, the 4.9% decline in organic adjusted revenue was more or less in line with company guidance, Jefferies said.

Meanwhile, the broker highlighted that the bottom-line beat was bolstered by a strong performance in the Rest of World region, where EBITDA came in at £73m compared with its £67.8m forecast, though results in the larger Europe and the UK and Ireland regions were still worse than expected. EBITDA in Europe and UK and Ireland were £106.7m and £52.6m, below the broker's forecasts of £110.8m and £54.3m respectively.