Bunzl PLC (BZLFY) has recently been upgraded to a Zacks Rank #2 (Buy), making it a compelling choice for investors seeking potential growth. This upgrade signifies a positive shift in the company’s earnings outlook, a key factor that influences stock prices.
The Zacks Rank, a widely recognized system for evaluating stocks, relies primarily on changes in earnings estimates. Analysts track the consensus earnings estimates from various sources, and upward revisions suggest a more favorable future for the company’s profitability. This upward trend in estimates for Bunzl is a strong indicator of its potential for growth.
Why Earnings Estimates Matter
The influence of earnings estimates on stock prices is significant. Institutional investors, with their large capital investments, heavily rely on earnings estimates to assess a company’s fair value. When estimates rise, they reflect a more optimistic view of the company’s future, prompting investors to buy more shares, driving up the stock price.
The Zacks Rank System: A Proven Approach
The Zacks Rank system has been proven effective in identifying stocks with strong potential. It classifies stocks into five categories based on earnings estimate revisions, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). Historically, stocks with a Zacks Rank #1 have generated an average annual return of 25% since 1988, highlighting the power of this system.
Bunzl’s Positive Outlook
Bunzl is expected to earn $2.47 per share for the fiscal year ending December 2024, representing a 3.8% year-over-year increase. Analysts have been consistently raising their estimates for the company. Over the past three months alone, the Zacks Consensus Estimate for Bunzl has increased by 4.8%. This upward trend reflects a growing confidence in the company’s future performance.
Objectivity and Reliability
The Zacks Rank system stands out for its objectivity and reliability. Unlike Wall Street analysts who often provide optimistic recommendations, the Zacks system assigns ‘buy’ and ‘sell’ ratings with an equal proportion across its entire universe of over 4000 stocks. Only the top 5% of stocks earn a ‘Strong Buy’ rating and the next 15% receive a ‘Buy’ rating. This rigorous approach ensures that the system accurately identifies stocks with the most favorable earnings estimate revisions.
Conclusion
The upgrade of Bunzl to a Zacks Rank #2 places it within the top 20% of Zacks-covered stocks in terms of positive estimate revisions. This strong ranking suggests that the stock is well-positioned for potential growth in the near term, making it an attractive option for investors seeking to capitalize on favorable earnings trends.
