Bunzl Stock Falls After Bank of America Initiates With 'Underperform' Rating

Shares in Bunzl plc (LSE: BNZL) fell in recent trading after Bank of America Securities reinstated coverage on the stock with an Underperform rating and a price target of 2,206p.

The stock dropped 1.7% to trade at 2,748p, retreating from a 52-week high it had reached in recent sessions.

Analyst Cites Valuation and Accounting Concerns

In its note, Bank of America argued that a year-to-date rally of approximately 30% had pushed Bunzl's valuation to levels that are difficult to support based on fundamentals. The downgrade from a major bank likely prompted profit-taking from investors.

The analysts highlighted specific accounting practices related to the company's acquisition strategy, pointing to an estimated £1.9 billion in cumulative M&A-related charges since 2013. According to the bank's research, these charges may have had the effect of:

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• Flattering adjusted earnings per share (EPS) by approximately 28%.
• Inflating the company's return on invested capital (ROIC) by 260 basis points.

Market Context

The bearish call from Bank of America reinforces existing caution among the broader analyst community, where the consensus rating for Bunzl was already at "Hold" with a price target below its recent trading levels.

While U.S. markets posted modest gains, the company-specific concerns outlined in the report were the primary driver of the selling pressure on Bunzl. The move lower was also set against a backdrop of domestic political uncertainty in the UK, which may have contributed to a more cautious investor sentiment.