Bunzl H1 preview: Where next for the Bunzl share price?

When will Bunzl release H1 earnings?

Bunzl is scheduled to release interim results covering the first six months of 2022 on the morning of Tuesday August 30.

Bunzl H1 earnings consensus

Analysts forecast that Bunzl will report 16.5% year-on-year revenue growth to £5.67 billion and a 11.5% rise in adjusted pretax profit to £377.3 million. Reported pretax profit at the bottom-line is expected to climb 16% to £320.1 million.

Bunzl H1 earnings preview

Bunzl said in late June that revenue rose around 16% in the first half of 2022 as the inflationary environment pushes up the price of its products and services while new acquisitions have also added firepower. Sales growth will be held back to 12% to 13% at constant currency as sterling has weakened significantly against the likes of the dollar this year, with Bunzl making over 90% of its profits outside the UK.

Bunzl has had to continue managing the shift in demand this year. Demand for products like masks, sanitiser and gloves exploded during the pandemic but this has been unwinding since last year, while the rest of the business has been recovering rapidly after being disrupted by the virus in recent years.

With this in mind, sales of everything from food services and grocery supplies to cleaning products and healthcare goods are forecast to rise at double-digit percentage rates in the first half, growing more than enough to counter the continued decline in sales of Covid-19 products. Bunzl said in June that ‘inflation remains the key driver of performance’, demonstrating its ability to mitigate higher costs by passing them onto customers.

Meanwhile, new additions to the Bunzl family are also adding fuel to the engine. The company is known for being constantly on the lookout for bolt-on acquisitions that can help add momentum and has announced a swathe of deals since the start of 2022 alone. Having purchased 14 businesses in 2021, Bunzl has kept up the pace in 2022 and purchased German cleaning and hygiene firm Hygi, New Zealand medical goods distributor USL, Australian warehouse storage specialist Containit, Brazilian PPE provider Corsul Group, UK outfit London Catering & Hygiene Solutions and AFL Groep, which provides warehousing and logistic services across Benelux.

‘Our acquisition momentum remains strong, with our active pipeline supported by a strong balance sheet,’ said CEO Frank van Zanten at the end of June.

Profits are set to grow at a slower rate than sales as its margin returns to more normal levels as the sales mix changes again this year, although profitability should remain elevated this year.

‘Growth of the base business is expected to be only partially offset by the further normalisation of sales of Covid-19 related products, albeit these are expected to remain ahead of 2019 levels. We continue to expect group operating margin in 2022 to be slightly higher than historical levels,’ said Bunzl in its latest update.

Bunzl has already upgraded its full year guidance twice due to a stronger than anticipated performance and to account for the contribution from its acquisitions. It entered 2022 expecting to deliver ‘slightly higher’ revenue than the year before and then said in February that topline growth would be ‘moderate’. The most recent upgrade in late June said revenue growth would be ‘very good’ this year. Analysts currently believe Bunzl can grow revenue by 12.9% in 2022, which would be the fastest rise on record since 2017, while reported pretax profit is forecast to grow 12.3% this year.

Where next for the BNZL share price?

Bunzl shares ripped higher after sinking to an eight-month low in mid-June, soaring over 22% to hit fresh all-time highs of 3,189p last week. However, the stock has since come under pressure and the recent uptrend has been broken.

The stock struggled to maintain a move above 3,163p as it set new highs earlier this month and this also pushed the RSI into overbought territory to suggest it could be a tough ceiling to crack. This is also in-line with the previous all-time high achieved in April. The RSI has fallen back into neutral territory after declining this week, but the fact trading volumes came in 5.5x higher than the previous day when the stock fell almost 2% yesterday also signals that we may have seen some profit taking following the recent rise.

Notably, only five of the 21 brokers that cover Bunzl believe the stock is currently undervalued and the average target price of 2,894p suggests the new highs have stretched its valuation.

The first initial floor for the stock is 3,041p, which has already been tested today. The 50-day and 100-day moving averages that are converging around the 2,920p mark could emerge as downside targets if that initial floor fails but the 200-day average at 2,871p should be treated as a firmer level of resistance considering this is in-line with the level of resistance seen throughout May and then as a brief level of support in July. Below here, 2,664p – the trough of the first five months of 2022 – comes into play.

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