Results preview: What should shareholders expect from Brambles Limited?

Credit: Stefan Baudy

The share price of global pallet, crate and container pooling specialist Brambles Limited (ASX: BXB) is currently trading around the $10.60 mark which is roughly mid-way between its 52-week high and 52-week low.

With the company due to report its interim profit result for the 2016 financial year (FY) on February 22, what should investors expect?

After delivering a very respectable 8% increase in revenue and 7% lift in profits on a constant currency basis for FY 2015, management (back in August 2015) went on to provide guidance for constant currency revenue and underlying profit growth for FY 2016 of between 6% and 8%. This guidance implies profit will fall within the range of US$1 billion to US$1.032 billion based on 30 June 2015 foreign exchange rates.

On Track

Judging by the first quarter trading update provided in October, Brambles would appear to be tracking well for achieving its guidance.

In the update, Brambles stated that the group had achieved constant currency sales revenue growth of 8% over the first three months, if this momentum can be maintained for the remainder of the year, it may see Brambles achieving the upper end of its guidance.

Keeping Perspective

Serious investors know that the true value of a company is tied to the long-term cash flows of its business, not the quarter-to-quarter short term fluctuations which will undoubtedly be experienced.

Earnings hits and misses compared to analyst consensus estimates are closely followed by many market participants and certainly can explain swift moves in share prices post a results release. For long-term investors this market “noise” can sometimes create attractive buying opportunities.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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