Bank of America Reinstates Coverage on European Stocks, Taps Experian as an 'AI Winner'

Bank of America Securities has reinstated coverage on a group of European business services and distribution companies, issuing a mix of bullish and bearish ratings. The bank initiated Buy ratings for Experian, Rentokil Initial, and D’Ieteren, while taking a cautious stance on Bunzl with an Underperform rating.

Bullish Calls on AI and Pest Control

Bank of America was particularly positive on Experian, reinstating it with a Buy rating and calling the credit bureau "an AI winner hiding in plain sight." The bank's analysts noted a low risk of business disruption from artificial intelligence and forecast a 13% earnings per share (EPS) compound annual growth rate (CAGR) through 2029. The report also projects $9.9 billion in cash returns to shareholders by 2031.

Rentokil Initial also received a Buy reinstatement with a 515 pence price objective. BofA anticipates a 12% EPS CAGR for the pest-control firm between 2025 and 2028, supported by a market growing at roughly 6% annually and early signs of a successful integration of its Terminix acquisition. Analysts also highlighted the potential for a primary stock listing in the United States, given that 60-65% of its earnings originate in North America.

Cautious Outlook for Bunzl

In contrast, BofA assigned an Underperform rating to British distributor Bunzl, setting a price objective of 2,206 pence. The bank expressed concern about the company's medium-term outlook, despite a 30% re-rating in its shares year-to-date.

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Key concerns cited in the BofA note include:

• Organic growth that has historically lagged GDP.
• A North American business that has contracted 16% in real terms since 2015.
• Gross margin improvements since 2021 that have not translated to operating profit margins.
• £1.9 billion in M&A-related charges since 2013, which BofA said has flattered adjusted EPS by 28%.

D'Ieteren's IPO Catalyst

Rounding out the updates, BofA reinstated D’Ieteren with a Buy rating, pointing to a potential catalyst from its Belron windscreen-repair division. The bank's analysis suggests that a partial IPO of Belron could significantly improve D'Ieteren's reported financial metrics, potentially lifting margins by 900 basis points and reducing its EV/EBITDA multiple by 40%. Such a move would also provide greater valuation transparency for the conglomerate.