In June, international distribution and services company Bunzl (LSE: BNZL) delivered an upbeat trading statement.
In the first half of 2021, revenue increased by between 6% and 7% at constant currency rates. And the progress arose because of contributions from recent acquisitions and a “strong” recovery from the pandemic.
Why I think this is a FTSE 100 stock to buy
The directors reckon the steady performance is due to the “resilience” of the business model. And I’m impressed by the firm’s multi-year financial record. It shows consistent upticks in revenue, earnings, cash flow, and shareholder dividends.
And steady growth looks set to continue. For example, the company completed two bolt-on acquisitions in the period, one in the UK and one in Australia. Chief executive Frank van Zanten said, “Growth through acquisitions is an important part of the ongoing strategy.”
With the share price near 2,642p, the earnings multiple for 2022 is just above 18. That’s a full valuation given that earnings growth will likely be measured in a low, single-digit percentage that year. And it adds risk for shareholders. But I think Bunzl has earned its rating. For me, this is a FTSE 100 share to buy on dips and down-days to hold for the long term.
Meanwhile, the recent half-year results report from BAE Systems (LSE: BA) revealed a performance that chief executive Charles Woodburn described as “strong”. He said it underlined his confidence in full-year guidance for “top-line growth, margin expansion and three-year cash targets.”
Overall, Woodburn reckons the technology-led defence, aerospace, and security solutions business is well-positioned for sustained growth ahead. Part of the plan for achieving that is the current ramping up of investment into advanced technologies.
Robust cash generation
In a sign that cash generation is robust, the company accelerated its UK deficit pension payments in 2020. And the directors just increased the interim dividend by 5% and announced a new share buyback programme worth up to £500m. Meanwhile, City analysts expect earnings to increase by just over 20% this year and by almost 9% in 2022. And with the share price near 576p, the earnings multiple is just above 11 when set against those figures.
There are some risks because much of the business depends on defence spending and government policies can change. However, I’d embrace the uncertainties and hold some of the shares for at least five years.
And last week’s half-year results report from housebuilder Taylor Wimpey (LSE: TW) trumpeted a “record” performance and “excellent momentum into the medium term.” Chief executive Pete Redfern said the company delivered a “strong” operating margin of just over 19%. He reckons that achievement arose because of tight cost discipline and higher completions in the period.
A market with a tailwind
Looking ahead, the directors expect full-year operating profit for 2021 of around £820m, a figure that beats analysts’ previous consensus. And UK completions will likely come in at the top end of the firm’s previous guidance of 13,200 to 14,000.
Taylor Wimpey is trading well in a market with a tailwind. However, the housebuilding industry is notoriously cyclical and any future downturn could hurt shareholders here. But the valuation remains modest. With the share price near 172p, the earnings multiple set against 2022’s expected earnings is around nine. And there’s a chunky dividend to collect along the way. I’m tempted by the FTSE 100 stock.
