Brambles (BXB) has remained on our Hitlist, even after they downgraded FY26 guidance in May here. BXB’s fall from grace was driven by US repair-capacity constraints that reduced the quality and availability of pallets across its CHEP network. However, we felt the August FY26 result provided some reassurance that the problem is fixable rather than structural: underlying profit rose 4% in constant currency to $1.49bn despite a larger-than-expected $90m US repair drag, while profit, EPS, dividends and cash flow were all solid. Excluding the repair impact, underlying profit growth was around 11%, suggesting the core business remains in good shape.
More importantly, there are signs the repair issue is improving. Customer surveys point to better pallet quality, Brambles is increasing repair capacity by around 20% by FY28, and management expects the US repair drag to fall to $35–55m in FY27, almost half FY26’s impact at the midpoint. However, FY27 guidance for 2–6% underlying profit growth was softer than hoped and elevated investment continues to weigh on returns, meaning the turnaround still needs to be proven through execution which is why the stock remains ~27% below its 2025 high.
Brambles is a beneficiary of AI and automation, primarily as an adopter rather than a provider. AI-driven demand planning should improve pallet availability and reduce costly operational failures. Brambles’ Serialisation+ initiative, which will digitally identify and track individual pallets to provide greater visibility across customers’ supply chains, could unlock valuable new data and revenue opportunities as customers increasingly automate their operations.
The financial benefits are largely an FY28+ story, making the March 2027 Serialisation+ investment decision an important milestone to watch.
The turnaround thesis has moved from hope towards evidence, keeping BXB on our Active Growth Portfolio Hitlist, although a strong second half of FY27 remains the key test of whether its US repair problems were genuinely a one-off.
- We like the risk/reward towards BXB initially targeting a move back towards $22.
MM is bullish towards BXB around $19.50
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