Shares in FTSE 100 distributor Bunzl (LSE:BNZL) crashed 25% on Wednesday (16 April) after the agency’s Q1 buying and selling replace. That places the share price again the place it was in March 2021.

I received’t maintain anyone in suspense right here. I feel the drop is a pointy overreaction and I’m within the technique of determining how to purchase this for my portfolio as quickly as I can. 

Why is the inventory down?

There wasn’t a lot to love about Bunzl’s efficiency within the first quarter of 2025. Gross sales from current companies have been down nearly 1% and margins contracted, amplifying the hit to earnings.

Consequently, the agency lowered its steering for 2025 and paused its share buyback programme to strengthen its steadiness sheet. So it’s not a shock the inventory fell sharply in response.

One motive Bunzl recognized for its weak outcomes is a troublesome macroeconomic setting within the US. And whereas the agency’s taken motion to handle this, it stays a major danger. In the end, the FTSE 100 firm can’t do a lot concerning the financial setting. However I feel a 25% fall within the firm’s share price is an enormous overreaction from the inventory market. 

Causes for positivity

On steadiness, Bunzl’s newest report is dangerous. However there are a number of factors that I see as optimistic and I feel it’s vital to not overlook these. The contribution to revenues from acquisitions was fairly robust – nearly 6%. This has been a key supply of progress for the FTSE 100 firm and it’s encouraging to see this working effectively.

I’m additionally inspired to see administration acknowledging the weak spot. CEO Frank van Zanten said his dissatisfaction with the outcomes, moderately than making an attempt to downplay the frustration.

Lastly, Bunzl’s forecasting a fast restoration. Working margins within the first half of 2025 are set to fall to 7% (vs 8% in 2024) however are set to get better to eight% for the total 12 months (vs 8.3% in 2024).

Am I shopping for?

It’s been a disappointing three months for Bunzl and there’s no assure this received’t proceed. However even the most effective companies undergo troublesome intervals and I’m trying to take benefit.

With regards to shopping for the inventory, the problem for me is that I don’t have money to speculate for the time being. So as a way to purchase proper now, I’ll must promote one thing. I’m reluctant to do that, since I fairly like my current investments. And whereas I like Bunzl shares very a lot at in the present day’s costs, I don’t suppose I have to be in a rush with this one.

I could be fallacious, however I don’t see this as a state of affairs that’s prone to reverse within the subsequent couple of weeks. So my plan is to purchase the inventory after I subsequent have money out there.

Potential returns

Firstly of the 12 months, Bunzl dedicated to investing £700m a 12 months into rising its enterprise. At in the present day’s costs, that’s 10% of the agency’s market worth. If the corporate can get previous the present challenges, the inventory could possibly be an ideal funding for me. And I feel the drop within the share price means the percentages are in my favour.