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On Wednesday, Deutsche Bank (ETR:DBKGn) raised the price target for Diploma Plc. (DPLM:LN) shares to GBP53.00, up from the previous GBP51.00, while reiterating a Buy rating on the stock. The adjustment follows Diploma’s first-half results, which outperformed market expectations in terms of organic growth and profit margins.
The company reported a 9% increase in organic revenue, surpassing the consensus estimate of 6%. Diploma’s reported revenues climbed by 14% to £728.5 million, which was 3% above Deutsche Bank’s forecast of £710.0 million. The operating margin expanded by 190 basis points to 21.5%, compared to the anticipated 21.2%, leading to a 25% rise in operating profit to £156.9 million. This figure was 5% higher than Deutsche Bank’s projection of £149.6 million, despite the company’s increased investment in central costs.
The adjusted earnings per share (EPS) saw a 25% increase to 80.2p, which was 5% higher than both Deutsche Bank’s estimate of 76.3p and the consensus estimate of 76.4p. Diploma’s free cash conversion rate remained stable at 78%, with net debt to EBITDA (ND/EBITDA) at 1.1 times and return on total average capital employed (ROTACE) improving by 110 basis points to 19.1%.
The financial institution’s analyst commented on the results, highlighting Diploma’s robust performance in the first half, which comfortably exceeded consensus expectations in key financial metrics. The company’s strong growth in organic revenue and margins contributed to a notable increase in operating profit, despite the company’s strategic investments. The unchanged free cash conversion rate and improved ROTACE further underscored the company’s financial health and operational efficiency.
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