RBC Capital upgrades Bunzl to ‘sector perform’

RBC Capital Markets upgraded Bunzl on Thursday to ‘sector perform’ from ‘underperform’ and lifted the price target to 3,350 from 2,700p as revenue headwinds ease.

"After a period of deflation-linked underperformance, we raise our rating to SP to reflect, principally, a brighter revenue and margin outlook, confidence around M&A execution and a new capital allocation strategy which we think widens the investor audience," RBC said.

The bank said the price target increase reflects the value of future M&A.

RBC also said it was lifting its FY24 and FY25 earnings per share estimates by around 2% and 4%, respectively, to reflect stronger assumed margin progression, incremental M&A and around £450m of planned share buybacks.

"Though we believe BNZL will remain a 'sleep tight at night' stock for longer-term investors, we currently prefer DCC and RS1 in the B2B distribution sub-sector," it said.

At 1040 BST, the shares were up 1.6% at 3,516p.