Bunzl FY preview: Where next for the Bunzl share price?

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Josh Warner
By : ,  Market Analyst

When will Bunzl report 2021 earnings?

Bunzl will report full year earnings for 2021 on the morning of Monday February 28.


Bunzl 2021 earnings preview

The global distribution specialist, which is responsible for ensuring businesses receive what they need when they need it, currently finds itself at the heart of the storm within global supply chains that are struggling with rising inflation and a scramble to secure the materials and workers needed to meet demand. But the company has so far impressed this year, having grown faster than anticipated and maintaining a higher level of demand than before the pandemic hit.

Analysts are expecting tepid topline growth of just 1.1% in 2021 to £10.22 billion after Bunzl delivered its fastest revenue growth in three years in 2020, providing tough comparatives. Growth at constant-currency should be closer to 7%, which is a better measure to go by considering 90% of Bunzl’s sales are made outside of the UK. Investors will take comfort knowing sales remain well above pre-pandemic levels and that growth is being driven by both M&A activity and organic drivers, and that Bunzl has beaten analyst forecasts more often than not in recent years.

Growth has also been skewered by the change in sales mix. The pandemic forced businesses to close and weighed on demand for many of the products used by businesses on a daily basis, but this was countered by strong demand for Covid-19 related products like disposable gloves, soap and disinfectant. This is now reversing as the pandemic eases and Bunzl is hoping the mix to normalise in 2022.

Adjusted pretax profit is forecast to fall 6.4% to £669.5 million in 2021 from £715.6 million the year before, while basic EPS at the bottom-line is expected to drop 5.9% to 121.0 p from 128.8p.

The outlook for 2022 will be key in deciding how markets respond to the results. Bunzl said in its last update that revenue in 2022 would be ‘slightly higher’ than in 2021, which may prove conservative considering markets are currently forecasting growth of 4%, and that operating margins should return to more historical levels as the sales mix normalises as sales of higher-margin Covid-19 products wane.

Bunzl has grown its dividend for 28 consecutive years and proved resilient throughout the pandemic. This trend will continue in 2021 with analysts expecting the dividend to grow to around 57.0p in 2021 from the 54.1p paid out in 2020.

The string of acquisitions Bunzl has made has been key in keeping the company growing. Bunzl spent £950 million on M&A activity in 2020 and 2021 – the highest sums on record - and is likely to continue making bolt-on purchases to expand its reach and suite of products and services. The 14 acquisitions made in 2021 included purchases of a North American protective footwear specialist, a UK online workwear firm and a distributor of insulated packaging.


Where next for the BNZL share price?

Bunzl shares have fallen over 7% since rallying to new all-time highs in early December.

Sellers have pushed the stock down to 2,650p several times in 2022 but have failed to push it past here without attracting buyers back into the market. This should hold as a floor considering it has provided a level of support on at least three occasions this year. Any move below here would open the door to the 2,624p, which is the 200-day sma that the stock has remained above for over four months.

Shares are currently testing the 100-day sma and if they can close above 2,749p then they could swiftly target the 50-day sma at 2,776p, which has acted as a ceiling for most of 2022. Recapturing these two moving averages brings the 2022-high of 2,829p into play.

The RSI remains broadly neutral and trading volumes stable, suggesting the stock could continue to drift between the 2,650p floor and the 50-day sma ceiling at 2,776p. Shares need to break out of this channel to signal where it is headed next.

Bunzl shares have shed 7% since peaking in late 2021


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