The diversified and global nature of Bunzls (LSE: BNZL) operations has long made me take a bullish view on the firms long-term earnings outlook.Having said this, however, I reckon the firms share price could be set to endure some volatility, with the next trading update quite likely in the coming weeks possibly providing the downward catalyst.
It would be foolish to ignore recent trading updates from Bunzls FTSE 100 (INDEXFTSE: UKX) outsourcing peers Capita and Mitie, both of which have described tough trading conditions in the wake of Britains EU referendum.
Last week Capita slashed its profit forecasts to 535m-555m for 2016, down from its previous estimate of 614m. And Mitie advised in mid-September that it expects operating profit to be very significantly lower for the period spanning April-September, the company citing uncertainty surrounding Junes Brexit vote and the prospect of lower UK growth rates.
Bunzls fortunes arent as dependent on a healthy domestic economy as those of Mitie or Capita the company sources just 15% of revenues from Britain, after all. And that helps me to maintain my bullish long-term take on the firm.
But thats not to say a poor performance here in the UK wont hammer investor appetite given the negative press surrounding its sector rivals. Bunzl has already announced that home sales had dipped 3% during January-June.
And I believe signs of additional pressure could cause many to question the firms high paper valuation of 23 times, and prompt some heavy sentiment-driven share sales.
Out of gas?
Im far more cautious over Centricas (LSE: CNA) share price prospects, in both the near-term and beyond, and reckon the energy giants upcoming market update (scheduled for Thursday, 15 December) could prompt a painful reversal.
Centrica has been unable to stop the steady decimation of its customer base as smaller, promotion-focused independent suppliers have continued to spring up. Indeed, the number of British Gas residential accounts slipped again during the first half, a 3% decline resulting from long-term contract roll-offs and increased competitive intensity.
On top of this, I believe the huge oversupply washing over the oil market could also put the profitability of the firms Centrica Energy arm under close scrutiny.
Crude values have spiked back above the $50 per barrel mark in recent days thanks to a tentative output freeze agreement from OPEC. However, doubts persist over whether this accord will hold as individual country quotas are yet to be designated, and members Iran, Nigeria and Libya have been exempt from reducing their own production.
Any failure to rubber-stamp the agreement at Novembers meeting could send oil values rattling lower again, and with them Centricas share price.
Sure, Centricas forward P/E rating of 15 times may be bang in line with the big-cap mean. But I reckon this value still fails to adequately address the companys high risk profile, and reckon Decembers update may facilitate a fresh stock value decline.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Centrica and Mitie Group. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.