Brambles reported 4% earnings growth in the first half, a 2% beat to UBS’s expectations, driven by a 10% beat from CHEP Americas. Earnings growth guidance updated to 3-5% from 1-2%, but free cash flow guidance decreased to -$350m from -$200m.
The cash flow downgrade was attributed to higher lumbar pricing impacting on the cost of further required pallet purchases. UBS notes the guidance upgrade may disappoint investors it suggests a more stable free cash flow profile during a challenging period.
The Buy rating is retained and the target price increases to $13.35 from $13.30.
Sector: Commercial & Professional Services.
Target price is $13.35.Current Price is $9.81. Difference: $3.54 – (brackets indicate current price is over target). If BXB meets the UBS target it will return approximately 27% (excluding dividends, fees and charges – negative figures indicate an expected loss).
