Broker Snap: UBS upgrades Bunzl to neutral

4th Mar 2013 13:45

A two-person team of analysts at UBS has upgraded Bunzl to neutral with a target price of 1,250p.UBS previously gave the FTSE 100-listed distribution and outsourcing group a sell recommendation and price target of 1,000p."Organic growth slowed across 2012, we estimate from approximately 6% in the fourth quarter of 2011 to approximately 0% in the fourth quarter of 2012, but we now believe we are past the inflection point. The valuation looks full after the recent re-rating, but this can be justified based on the potential earnings upgrades, and we see the risk/reward balanced at current levels," the analysts commented. "We believe that there is a good chance of earnings upgrades over the next year, driven by further mergers and acquisitions and FX. In an upside scenario, including another year of strong mergers and acquisitions spend, and an FX tailwind, we could see approximately 12% upgrades to fiscal year 2013 earnings per share, compared to approximately 5% potential downgrades in a downside scenario." The analysts said that full year 2012 results and outlook were broadly "in-line with expectations"."Bunzl reported fiscal year 2012 results that were approximately 2% ahead of expectations at the PBTA line, as profitability in North America improved (despite the flagged slowdown in organic growth). We already forecast a recovery in organic growth in FY13 (from H212 levels), and broadly stable margins, and updating for year-to-date FX drives the majority of our approximate 8% forecast increases," they added. Bunzl's share price was up 1.63% to 1,307p at 13:48 on Monday.MF