RBC Capital Markets lifted its stance on Bunzl shares on Monday to ‘sector perform’ from ‘underperform’ and upped the price target to 2,270p from 2,200p following a de-rating.
The bank pointed to a “robust” set of FY results earlier this month and the stock’s 20% underperformance versus the FTSE All-Share index over the past six months.
“Though the recovery trajectory for non-Covid 19-related products is uncertain, transportation cost pressures are building and FX has moved the wrong way, bolt-on M&A will continue to support earnings per share, revenues remain well-diversified and we believe the valuation no longer looks stretched,” RBC said.
It said the extent to which Covid product demand unwinds and other products recover as lockdowns gradually ease is uncertain, “but there is something of a natural hedge in place in terms of the revenue profile”.
On the cost side, RBC said that despite a good track record of managing product cost inflation and supply bottlenecks, rising logistics costs could add headwinds to the underlying FY21 margin progression, though this is likely to be mitigated via higher-margin bolt-on M&A.
Analysts at Berenberg raised their target price on construction firm Taylor Wimpey from 180.0p to 210.0p on Tuesday, citing continued momentum across the group.
Berenberg highlighted that Taylor Wimpey shares were “the second-best performer” in the sector year-to-date, up 23%, as the company’s valuation was now in line with historical averages.
The German bank expects volumes and margins will continue to recover in the first half of 2021, buoyed by strong market conditions, leading it to retain its ‘buy’ recommendation on the stock and hike the target price.
Berenberg also stated that recent land purchases by TW laid foundations for growth, with the company raising around £510.0m in summer 2020, some of which was to acquire land opportunistically when pricing was favourable – something the analysts think should support volume growth in 2022 and beyond.
The raise also strengthens the balance sheet in the near-term, according to Berenberg, with Taylor Wimpey allocating capital towards land purchases but also using strong cash generation to likely support “attractive capital returns”.
“TW is trading at 1.6x FY 2021E book value, in line with the five-year average. As a result of the increased forecasts, our price target increases to 210.0p and we retain our ‘buy’ rating,” concluded Berenberg.
