Investors in global pooling company Brambles Limited (ASX: BXB) had a great year in 2013, with the company reporting a 5% increase in revenues and a 5% increase in underlying profit. There is little reason to think that the trend won't continue in financial-year (FY) 2014, with the company providing guidance for a further 4% to 8% increase in underlying profit.
The beauty of the Brambles business model is not only its skill in managing enormous container pools around the globe, but also the diversified revenue streams it has built which provide shareholders with dependable cash flows.
The business model alone is appealing and reason enough for investors to keep an eye on the stock for any buying opportunities, however there are at least three other reasons to like Brambles as investors head into 2014.
1) Recall demerger
Late last year Brambles demerged its document storage business Recall Holdings Ltd (ASX: REC) from its pooling operations. Recall's growth profile doesn't appear as exciting as Brambles and nor are there any synergies between the two businesses. The separation into two distinct and separate operating companies will allow Brambles' management to fully focus on growing the pooling operations, without any distractions, which should benefit shareholders.
2) US economic recovery
Brambles, like a select group of companies, including Amcor Limited (ASX: AMC) and Ansell Limited (ASX: ANN), is significantly leveraged to a recovering US economy. With over US$2.2 billion in revenues from pallets in the Americas region and many retail customers who will require more pallet shipments as consumer spending picks up, Brambles stands to gain from increased utilisation of its pallet pool.
3) Exchange rate boost for dividends
Brambles earned nearly 30% of its operating profit in US dollars in FY 2013. The company also reports its results in US dollars and declares its dividends in US dollars. For Australian-based shareholders, dividends are still paid in Australian dollars which means that a declining Aussie dollar benefits shareholders, as the dividends they receive are higher thanks to the weaker domestic currency.
Foolish takeaway
With the stock enjoying a solid rally last year, Brambles will need to deliver on its guidance in 2014. Any stumbles which affect the US economic recovery also need to be monitored by investors, as this would affect the growth outlook for Brambles too.
