Shares in Breville Group Ltd (ASX: BRG) have been trending lower over the past few weeks, but if you believe the team at Macquarie, that's just more reason to buy.
Macquarie has issued a research note to its clients with a bullish price target on Breville shares.
We'll get to exactly what that price is shortly, but first, why are they so keen on the company?
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Breville tends to lead the market
Macquarie analyses the performance of small-appliance companies globally, with the data used to provide a benchmark for how companies such as Breville are performing.
They said the most recent data was mixed, with fellow coffee machine maker De'Longhi giving guidance for mid-single-digit sales growth, while Williams-Sonoma was guiding to 2% to 6% like-for-like sales growth.
Other companies in the sector were mixed, with SharkNinja very positive with 10% to 11% growth guidance, while Nestle's Nespresso division was expected to deliver 3% to 4% organic growth.
Macquarie said that Breville's first-half revenue beat the Macquarie Kitchen Benchmark, and had outperformed the benchmark by about 9% per year since 2018.
Macquarie said that historical outperformance supported its forecast for compound annual growth of 10%-plus from FY25 to FY28.
They said further:
Coffee growth, new market entry and new product development continue to drive outperformance vs sector peers.
Strong first half
Breville itself said while releasing its first-half results in February that it expected EBIT to be "a slight increase" over the previous year; however, that was assuming "no significant change in economic conditions in the group's major trading markets''.
Chief Executive Jim Clayton said at the time that the company had delivered strong results while executing two transformation projects at the same time.
These were "driving the manufacturing diversification of our 120-volt portfolio and leaning into the front edge of our enterprise-wide AI program''.
Mr Clayton added:
The tariff backdrop in the US made the half incrementally challenging, but the results speak for themselves. We achieved 80% of US Gross Profit manufactured outside of China by December, grew our position in key categories, and minimized the impact on the P&L. Coffee continued to lead, delivering double-digit revenue growth. Our NPD pipeline again contributed materially to performance, with strong launches across espresso and cooking. Beanz continued its rapid growth trajectory, scaling across four countries with the infrastructure and processes now proven to support further growth. Our newest markets—Mexico, China, the Middle East, and Korea—collectively grew over 50%, further validating geographic expansion as an important growth lever. These markets are still early but the customer and partner engagement has been strong.
Breville has also recently released a range of toasters that assess how cooked toast is visually, rather than by time, in what the company says is a big step forward.
Macquarie has a price target of $37.10 on Breville shares compared with $26.26 currently.
The company also pays a 1.4% dividend yield.
