Bunzl Q3 Volume ‘Continued to be Weak’

Bunzl (LON: BNZL) shares fell over 1% at the start of Friday's session, not helped by a rating downgrade from Citi on Thursday.

The investment bank cut Bunzl's stock to Neutral from Buy with an unchanged price target of 3,700p a share.

The bank highlighted the firm's earnings forecasts, which it said are close to consensus. They also believe that with Bunzl shares now trading in line with long-run valuation multiples, it is “difficult to articulate further incremental, positive share price catalysts.”

Looking ahead to Bunzl's third quarter update, Citi estimates revenue for the period increases by 0.1% increase YoY.

“During the quarter, volume continued to be weak while pricing remained broadly stable,” said Citi. “Italy remained a resilient market with slight volume decline expected, while demand in Central Europe remained subdued but should see improved decline rate against an easier comp base.”

They also noted that Eastern Europe has likely seen positive volume growth, while volume in the US was also disappointing, driven by weak residential, delays in some large infrastructure projects as well as an unfavorable weather impact.

“As the expected volume recovery for the second half was largely muted, there is possibility that consensus for FY'24 could come down after results,” concluded the bank.

Citi's downgrade is in contrast to JPMorgan, which upgraded Bunzl to Overweight from Neutral and increased the price target to 3,980p from 3,660p earlier this week.

JPMorgan said: “The key new information for us has been the clear upside to the North American margin from higher own brand penetration within Grocery and Foodservice.”