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He FTSE 100 It's falling this morning but nothing like it Bunzl (LSE:BNZL) share price. The £11bn outsourcing group fell 5.17% in early trading today (December 17), the fastest fall on the index. This follows a mixed trading update before the end of the year.
Bunzl is one of those unsung heroes that investors often overlook and then draw attention to when they see how well his stock has done. At least that's what happened to me.
It must have been over five years since it first crossed my radar, but I never bought it in that time. So what stopped me?
Is it time to buy these income growth stocks?
Every time I looked at the stock it looked a little overpriced as it had just had a good run. Today they are a little cheaper, so this time I have no excuse.
Despite this morning's drop, Bunzl shares are up a solid 14.29% in one year and an impressive 69.43% in five.
Bunzl is easily overlooked because it has no consumer-facing role, but quietly supplies everyday items to other companies, such as disposable coffee cups, cleaning materials, bandages and rubber gloves.
It's far from boring, however, as it's growing rapidly through constant acquisitions. 2024 was a record year here as it committed to spending £850m on 13 acquisitions. That's where most of this year's tepid growth comes from.
Today's update showed that 2024 revenue will steadily increase by 3% at constant exchange rates. At real exchange rates, they will remain stable or fall by 1%.
Group revenue growth driven by acquisitions “with a small drop in underlying revenue during the year”. The pipeline is still going strong.
A great dividend history
However, the group's adjusted operating profit in 2024 “represent a sharp increase compared to 2023 at constant exchange rates”said Bunzl, while operating margins will be slightly higher. It's all a bit disappointing though.
2025 looks a little brighter, and the board hopes “Strong revenue growth in 2025… driven by announced acquisitions and slight underlying revenue growth”. Higher margin acquisitions and “a good increase in the underlying margin” should help.
Bunzl began a £250m share buyback in August, of which around £200m has already been completed. Confirmed a further £200m buyback in 2025.
These are difficult times as the cost of living crisis drags on and interest rates remain higher for longer than expected, reducing business spending. Now I wonder how import tariffs will impact a global business like this. Bunzl is priced for growth, with shares trading at 18.62 times earnings. Not exactly a bargain.
Christmas is coming and I don't have the cash to buy these stocks today. Come the New Year, it will be the first thing on my shopping list. I've waited long enough. I just hope the stock price hasn't recovered by then.
