A stock picker’s guide to Brambles Limited in 2014

The outlook is positive for Brambles with earnings forecast to increase.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Brambles Limited (ASX: BXB) is a pooling solutions company which specialises in reusable pallets, crates and containers. While the company is best known for its blue wooden pallet which is branded CHEP, Brambles business is now about much more than just the CHEP pallet, thanks to acquisitions which have expanded its operations into reusable plastic containers (RPC). A particularly important acquisition was the 2011 IFCO systems’ purchase, which is the world’s largest RPC business.

What happened in 2013?

2013 was a sound year for Brambles with the company delivering a 5% increase in underlying profit to US$1.057 billion. Highlights from the year included pallet revenue from emerging markets (a growth area for the company) up 15%; further operating efficiencies from the IFCO acquisition; and 15% growth in RPC revenue (another growth area).

The single biggest change for the company was the decision to demerge its document management business from the Brambles’ pooling operations, which led to the listing of Recall Holdings Ltd (ASX: REC).

Outlook for 2014

The demerger of Recall has left Brambles solely focused on pooling solutions. The firm’s exposure to emerging economies and leverage to the increased flow of goods from a pick-up in economic activity creates significant upside potential. Management’s guidance for financial year (FY) 2014 is for a 4% to 8% increase in underlying profit.

On the dividend front, Brambles raised its dividend by 1 cent per share (cps) to 27 cps in FY 2013. Shareholders will need to account for the removal of Recall’s earnings when forecasting the payout for the coming year, however based on data provided by Morningstar, Brambles is forecast to pay a dividend of 24.5 cps.

Foolish takeaway

Investors looking for companies which offer exposure to a pick-up in global economic activity should keep both Brambles and transport and logistics provider Toll Holdings Limited (ASX: TOL) on their watchlist. Both companies operate around the globe with high fixed cost bases which insert significant leverage into their respective business models.

Motley Fool contributor Tim McArthur owns shares in Toll Holdings Ltd.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »