Narrow-Moat Bunzl Resilient in the Face of Inflation in Q2

Narrow-moat Bunzl’s brief preclose statement perfectly illustrated the resilience of the company’s business model. Headline revenue growth reached 16% in the first half, driven partly by positive currency translation, continued acquisitions, and inflationary price increases. It is the last part of this equation that we are most excited about as Bunzl proves itself one of a short list of firms with true pricing power and the ability to effectively and consistently pass through inflationary price increases, thus protecting its operating margin in times of inflationary pressure. Management upgraded its full-year guidance, albeit qualitatively. While we may adjust our near-term numbers slightly, we do not expect this to have a material effect on our GBX 2,600 fair value estimate. Despite the recent market-related pullback, we view the shares as being fairly valued.