After this week’s sell-down, is it time to buy Brambles shares?

Brambles Ltd (ASX: BXB) shares have had a shocker of a week so far, plumbing new 12-month lows after the company significantly downgraded its outlook for the full year.

The question is, does that mean the shares are now going cheap, or is there more pain to come?

I’ve canvassed the views of three major brokers, and all believe there’s some upside in the share price from where Brambles shares are now, but they differ widely in their outlook.

I’ll get to their specific share price targets shortly. Firstly, let’s recap Brambles’ big announcement this week.

Major cost pressures

One of the main features of the announcement was that Brambles was having to spend more on repairing its pallets to bring them up to standard for customers who were increasingly automating their processes.

Brambles said it was progressively increasing its repair quality to meet this demand, which had contributed to creating a bottleneck.

The company said:

During April 2026, this focus on quality consistency has coincided with short-term repair capacity constraints in parts of Brambles’ US subcontractor service centre network which Brambles expects to be resolved by the end of 1H27. These short-term repair capacity constraints have been driven by subcontractor turnover, labour availability challenges and the additional time required to repair pallets consistently to a higher standard. At the same time as repair capacity tightened, Brambles experienced higher than anticipated customer demand.

Brambles said there was a “material” cost increase over the short term. The company said it was also buying another two million pallets in the fourth quarter, with more purchases expected early in FY27.

As a result of these various elements, Brambles downgraded its sales revenue growth forecast to 2% to 3%, down from 3% to 4%, and downgraded its underlying profit growth forecast to 3% to 5%, down from 8% to 11%.

Shares appear oversold

The team at Macquarie have run the ruler over the changes at Brambles and has reduced their price target on the shares from $23.35 to $18.60.

Macquarie said:

A need to invest incrementally in customer outcomes has been a concern for us. Resolving this issue presents ongoing earnings risks, especially if full mitigation requires price adjustment. We think multiples will remain pressured.

The team at Morgans came up with a similar share price target of $18.70.

They said the trading update was disappointing, while noting that Brambles’ US$400 million share buyback, also announced this week, would give the share price some support.

Morgan Stanley was an outlier among the brokers with a price target of $28 on Brambles shares.

They noted that cost headwinds should ease by the end of the first half of FY27, “though further demand spikes and subcontractor exits remain key risks”.

Brambles is valued at $23.74 billion.

The post After this week’s sell-down, is it time to buy Brambles shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.