The S&P/ASX 200 Index (ASX: XJO) stock Brambles Ltd (ASX: BXB) has delivered 40% capital growth in 2024 to date, as shown in the chart below. But one fund manager thinks this global business can grow much more in the future.
Brambles' key offering is reusable pallets and containers with its CHEP brand. They are used to transport a wide array of goods, including fast-moving consumer goods, fresh produce, beverages, retail, and general manufacturing industries.
The company operates in 60 countries and has a total of 347 million pallets, crates, and containers.
So, which fund manager is interested in this global industrial ASX 200 stock and why?
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Growth and income appeal
The Investors Mutual Australian (IML) Share Fund aims to invest in quality Australian shares that can deliver medium- to long-term capital growth and income.
In the current financial environment, IML is targeting businesses with "strong pricing power and those that have reliable revenues and earnings".
The fund manager believes those companies should "perform well in most environments, including further consumer weakness or persistent inflation".
Reasons to like Brambles shares
IML likes that Brambles is the world's largest reusable pallet, crates and containers business. The fund manager noted that Brambles shares rose by 31% over the three months to 30 September, significantly outperforming the ASX 200, which only climbed 6.5% over that same time period.
There were a few factors that IML pointed to why it's bullish about the ASX 200 stock.
The fund manager noted that Brambles' full-year result showed "strong realised pricing gains and improved asset efficiency, driving improved operating leverage and free cash flows."
In FY24, Brambles reported that total sales increased by 7%, driven by "price realisation to recover the cost-to-serve".
Continuing operations underlying net profit and earnings per share (EPS) both increased by 17% as pricing and asset efficiency improvements "more than offset" cost-to-serve increases and other cost increases.
Brambles also reported that free cash flow before dividends was US$882.8 million, up US$384.7 million year over year thanks to lower capital expenditure, higher earnings and improved compensation for lost assets.
What about the outlook for the ASX 200 stock?
The company said it expected more growth in FY25. Revenue is expected to rise by between 4% and 6%, while underlying profit is guided to rise by between 8% and 11%. Free cash flow before dividends is expected to be between US$750 million and US$850 million.
IML concluded its optimistic thoughts on the global logistics business with the following:
We expect BXB to deliver double-digit earnings growth in the coming years as its margins expand and share buybacks continue.
