RBC Capital Markets raises target price on Bunzl

Analysts at RBC Capital Markets hiked their target price on distribution and services group Bunzl from 1,750.0p to 2,000.0p on Tuesday.

RBC said Bunzl's stock had "performed well" and proved far more resilient than the market had presumed, with first-half results coming in slightly ahead of forecasts - but largely consistent with the group's June update.

However, although Bunzl's outlook pointed to the strength of its business model, the Canadian broker believes the market will now focus on the tougher comparatives and the tough macro environment going into 2021.

"It is difficult to fault the group's track record of growth," said the analysts. "However, with structural pressures in grocery and retail, macroeconomic impacts from the government measures to contain Covid-19, potential competitive pressures emerging (Amazon B2B) and an increase in cost pressures and environmental awareness, this resilience has started to be tested."

With the valuation back at 20.0x 2021 price-to-earnings and growth seeming harder to come by going forward, RBC expects sentiment and momentum will "likely weaken", leading it to reiterate its 'underperform' rating on the stock.