Here’s why the Brambles share price is soaring 7% today

Here’s why Brambles shares are moving northwards today…

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a man sits back from his laptop computer with both hands behind his head feeling happy to see the Brambles share price moving significantly higher today

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Key points

  • The ASX 200 is enjoying some mild gains today
  • But Brambles shares are powering ahead with a 7% gain
  • ASX investors are responding to a trading update released today 

The S&P/ASX 200 Index (ASX: XJO) is having a pleasant day of mild gains so far this Thursday. At the time of writing, the ASX 200 is up a mild 0.37% at around 7,597 points. So it might come as a nice surprise for investors in Brambles Limited (ASX: BXB) to find their company’s share price is doing far better.

At the time of writing, Brambles shares are up a very pleasing 7.09% at $10.73. This decisive move upwards is almost enough to erase the packaging company’s dreary year-to-date performance.

So what’s behind Brambles’ move to the upside today?

Brambles share price rises after quarterly trading update

Well, it appears to be a response to the company’s quarterly trading update released to investors this morning before the ASX market open. This update covers the first nine months of the 2022 financial year. That’s 1 July 2021 to 31 March 2022. So let’s see what Brambles had to show for these nine months.

To kick things off, the company reported that it has received US$4,067 million in sales revenue for the period. That represents a 7% increase on the prior corresponding period, or 8% at constant foreign exchange rates. According to Brambles, this increase “reflected ongoing strong price realisation to recover cost-to-serve increases in all regions, including sustained high levels of input cost inflation and increased capital cost of pallets”.

The Americas was Brambles’ strongest-performing segment over the nine months, recording a sales revenue increase of 11%. The Europe, Middle East and Africa (EMEA) segment was next with a 6% increase. Asia-Pacific recorded a 5% rise.

But perhaps most pleasingly for investors, Brambles also used these numbers to upgrade its earnings guidance for the full 2022 financial year. For the 12 months to 30 June 2022, Brambles is now expecting sales growth of 8-9% (up from 6-8%). It’s also anticipating underlying profit growth of 6-7% (up from 2-5%). Finally, free cash flow after dividends at a net outflow of US$300-$350 million (down from approximately US$350 million).

CEO upbeat on new numbers

Here’s some of what Brambles CEO Graham Chipcase had to say on these numbers:

Strong sales revenue momentum continued in the third quarter resulting in year-to-date growth of 8%. The sales performance in the third quarter was driven by pricing actions in response to operating cost inflation, pallet scarcity and increased pallet costs driven by extraordinary lumber inflation…

Despite all these headwinds, the success of pricing and business efficiency initiatives supports the upgrade of our FY22 guidance for sales, earnings and Free Cash Flow after dividends. This upgrade reflects our focus on recovering the increased cost-to-serve and generating appropriate returns on the capital investments needed to service our customers and support future growth…

Together with our asset efficiency and sustainability initiatives, we are confident the investments being made to transform our business will deliver a step change in customer value creation, profitability and cash flow generation over the medium term.

Brambles share price recap

Brambles has a market capitalisation of $15.4 billion and a current dividend yield of 2.74%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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