Brambles Needs More Investment to Overcome US Repair Capacity Issues, Jefferies Says

Brambles' (ASX:BXB) repair capacity constraints in the US carry implications that will continue into fiscal 2027 at a higher cost than previously anticipated, Jefferies said in a Monday note. The company will likely need to invest more in new pallets in Europe and for its CHEP USA brand, with repair costs rising as the pool ages, the equity research firm said. "While increases in durability initiatives do help lower damage rates in a pallet pool, they are generally not themselves sufficient to offset the impacts of a pool age that is increasing," Jefferies said as it made a case for higher capital expenditure levels to improve pallet quality for customers. Brambles in May lowered its growth guidance for ­sales revenue and underlying profit, citing the withdrawal of US repair capacity. Jefferies lowered its earnings forecast for Brambles to reflect the greater impact of service center issues through fiscal 2027. The invest firm said it is unclear if the company will make overhead reductions beyond the already indicated amount for fiscal 2027. Jefferies maintained a hold rating on the company while lowering its price target to AU$18.22 from AU$19.55. Shares of Brambles fell.