Bunzl keeps full-year outlook as Q3 growth slightly tops forecasts

Investing.com -- Bunzl Plc’s (LON:BNZL) third-quarter revenue edged up 0.4% on Tuesday, modestly topping expectations and prompting the distribution and outsourcing group to reaffirm its full-year guidance despite continued margin pressure.

Analysts at Jefferies said the 0.4% rise in underlying organic day-adjusted revenue compared with consensus expectations for a 0.1% decline and Jefferies’ forecast for a 0.2% drop. 

The brokerage noted the growth came against weaker comparatives of a 4.7% decline in the third quarter of 2023 and a 1.2% fall in the same period of 2024. 

The company noted year-over-year EBITA margin decline moderated in Q3 compared to H1, adding that this improvement was required to meet consensus forecasts of a 30-basis-point decline in the second half, following a 100-basis-point fall in the first half.

Reported revenue fell 0.8% during the quarter, reflecting a 1.4% foreign exchange headwind and a 1.1% reduction in trading days. 

Jefferies said acquisitions contributed 1.4% to growth, describing the year as “muted” for mergers and acquisitions. The company has announced seven acquisitions so far in 2025, with total committed spending of about £140 million, compared with an average annual spend of £550 million in previous years.

Jefferies said Bunzl’s full-year 2025 outlook remains unchanged. Management expects “broadly flat” day-adjusted organic revenue growth, consistent with consensus and Jefferies estimates of a 0.2% decline. 

On a constant-currency basis, revenue is forecast to grow moderately, supported by the contribution from completed acquisitions. 

The company also reiterated its EBITA margin outlook, expecting it to be “moderately below 8%.” That compares with 8.3% in 2024, while consensus places the figure at 7.7% and Jefferies estimates 7.6%.

No new acquisitions were announced with the update. The report said net debt to EBITDA is projected to be “just over” 2x at year-end, aligning with Bunzl’s goal to remain toward the lower end of its 2x to 2.5x target range by the end of 2025.

Jefferies maintained its “underperform” rating on Bunzl, with a price target of 1,900.00p, representing a 22% downside from the prior closing price of 2,450p. 

“Q3 underlying (organic day-adjusted) revenue growth is modestly ahead of expectations,” Jefferies analysts Ryan Flight, Allen Wells and Simon Lechipre said in the note, while emphasizing that margin pressure remains a key issue.

Bunzl’s total market capitalization stood at £8.2 billion, or about $11 billion, with shares trading between 3,622p and 2,210p over the past 12 months, according to the report.

Jefferies added that Bunzl’s modest third-quarter improvement and stable guidance reflected operational consistency in a weaker comparative environment but noted the limited M&A activity and lower margin profile continue to weigh on its overall assessment.