Brickworks Limited (ASX: BKW) has been a reliable compounder over time, thanks to its strong-performing core business and a valuable stake in Washington H. Soul Pattinson (ASX: SOL).
At the time of writing, Brickworks shares are roughly 5% off all-time highs, and long-term shareholders have likely made a good return. But with earnings season just around the corner, is it a buy, hold, or sell?
What the brokers are saying
Macquarie recently maintained a neutral rating and a price target of $31.70 per share. The broker expects strong performance in the property division, with 2H FY25 EBITDA in this division far exceeding the first half of the year.
However, performance in the building products division is expected to remain sluggish in both Australia and the US. North American operations, in particular, continue to underwhelm, with soft market conditions putting pressure on earnings.
Analysts at UBS, on the other hand, cut their rating from buy to neutral, noting the recent share price appreciation following the announcement of the Brickworks – Soul Patts merger. The broker, however, lifted its price target to $34.25 (from $29.00), driven primarily by mark-to-market gains in Brickwork's listed investment portfolio (which includes Soul Patts).
Earnings picture: Mixed
The upcoming result will likely show strength in the property division and modest improvement in Australian building products. However, UBS highlights that US operations for building products are still facing headwinds.
Both brokers seem to agree that following the recent "merger gains", there is not much of a near-term catalyst for the share price to rise significantly higher.
Foolish Takeaway
Brickworks, over the years (and Soul Patts too for that matter), has been a solid company to build a portfolio on.
However, the verdict ahead of earnings seems to be a solid hold. Perhaps there is a lesson in there somewhere. Buying even great companies at high valuations can yield mediocre results. But also, long-term buying and holding is about buying and holding for the long term.
In truth, no one knows for sure how Brickworks will perform when it announces its full-year 2025 results, but if we are talking about the very long term, the combined Brickworks and Soul Patts company seems to be a great company worth hanging onto.
