Digital Tracking And Circular Supply Chains Will Improve Efficiency

Key Takeaways

• Expansion into digital tracking, automation, and sustainable solutions is improving operational efficiency, customer retention, and revenue diversification.
  
• Cost-saving initiatives and focus on ESG strengthen margins, competitive advantage, and long-term recurring revenues.
  
• Persistent cost pressures, digital execution risks, and softer growth targets signal ongoing challenges to Brambles' revenue, margin expansion, and long-term investor confidence.

Catalysts

Operates as a supply-chain logistics company.

• The ongoing rollout of advanced digital and tracking solutions (Serialisation+, autonomous tracking devices, and enhanced data analytics) is expected to deliver significant gains in operational efficiency and asset productivity, which should structurally reduce loss rates, lower capital intensity, and support margin expansion-all of which directly benefit future net margins and free cash flow.
  
• Sustained momentum in converting whitewood pallet users-including SMEs and large FMCG companies-to pooled, reusable pallets, is expanding Brambles' addressable market as supply chain complexity, automation, and cost pressures make the company's solutions increasingly attractive, leading to robust net new business wins and multi-year revenue growth potential.
  
• Rising customer demand for end-to-end supply chain transparency, automation, and sustainability is enabling Brambles to move up the value chain with integrated digital customer solutions, value-added services, and circular business models-supporting higher customer retention, pricing power, and diversified, higher-quality revenue streams.
  
• Ongoing cost-saving programs-including network optimization, automation in repair and inspection, and the overhead restructuring initiative-are projected to drive continued operating leverage and margin improvement, with the annualized benefit of the current restructuring program alone expected to exceed $55 million by FY27, supporting higher future earnings and cash flows.
  
• Heightened focus on ESG and regulatory pressure for sustainable, circular economy solutions gives Brambles a long-term competitive advantage, supporting premium customer relationships, higher barriers to entry, and price resilience, underpinning defensive, recurring revenues and enabling potential future re-rating if sustainability is underappreciated in current valuation.

Brambles Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Brambles's revenue will grow by 4.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.6% today to 14.6% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $0.85) by about September 2028, up from $864.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.1x on those 2028 earnings, down from 26.8x today. This future PE is lower than the current PE for the AU Commercial Services industry at 33.4x.
• Analysts expect the number of shares outstanding to decline by 1.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.73%, as per the Simply Wall St company report.

Brambles Future Earnings Per Share Growth

Risks

• Persistent macroeconomic uncertainty and subdued consumer demand have resulted in lower like-for-like pallet volumes, particularly in major markets like the U.S. and Europe; if sluggish demand persists or worsens, Brambles may struggle to achieve its targeted mid-single-digit revenue growth, impacting long-term revenue and earnings growth.
  
• The company is facing rising input, repair, transport, and storage costs, particularly due to higher pallet damage rates and excess plant stocks in the U.S.; if cost inflation or asset inefficiency escalates again, this could put renewed pressure on net margins and free cash flow.
  
• While Brambles is generating near-term benefits from asset efficiency and digital transformation (Serialisation+), there is significant execution risk and uncertainty in scaling these digital initiatives profitably across complex markets like North America and the U.K.-delays, technology setbacks, or higher-than-expected CapEx could blunt expected margin expansion and constrain future earnings.
  
• Guidance for revenue growth has shifted downward, with management reducing the lower end of its sales CAGR targets and the new compensation grid now starting at 3% (down from 5%)-this signals a more cautious long-term outlook that may indicate sustained pressure on top-line growth and limit investor confidence in future financial outperformance.
  
• The shift toward sharing asset productivity benefits and cost reductions with customers (e.g., offering lower prices in exchange for better behaviors) could dampen pricing power and price realization, potentially resulting in softer revenue growth and a heavier reliance on productivity improvements to protect margins-if customer bargaining power increases further or alternative pallet solutions emerge, Brambles could face structural headwinds to both revenue and margins.

Valuation

• The analysts have a consensus price target of A$25.077 for Brambles based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$29.02, and the most bearish reporting a price target of just A$20.73.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.8 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 23.1x, assuming you use a discount rate of 6.7%.
• Given the current share price of A$25.93, the analyst price target of A$25.08 is 3.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.