Investing.com -- Bernstein analysts have flagged several best ideas for the second quarter of 2025, namely Vinci (EPA:SGEF), Tesco (OTC:TSCDY) Plc, and Bunzl (OTC:BZLFY), based on their strong market positions and favorable financial outlooks.
Bernstein has rated Vinci as “outperform” with a price target of €146.7, making it their Best Idea for 2025. The report emphasizes that recent market volatility has created a compelling opportunity to increase exposure to this high-quality name.
Vinci offers rising earnings, dividend per share (DPS) growth, and solid cash flows. Bernstein views Vinci as a high-quality defensive stock with unlocked deep value, believing the current market price undervalues its assets.
Specifically, the current share price discounts not just zero value for domestic toll roads, which offer predictable cash flows, but an implicitly negative value.
Additionally, contracting units (Vinci Energies, Vinci Construction, and Cobra IS) are implicitly trading at approximately 3x 2025e EV/EBIT, significantly below Bernstein's NAV value.
Bernstein believes Vinci's profile is attractive amid the current macro backdrop due to its mix of defensive (concessions with growing traffic and CPI-linked tariffs) and cyclical (contracting with solid backlogs and potential for margin recovery) activities.
The company also has the resources to achieve its goals and pursue further development in contracting and concessions, both domestically and internationally.
Key factors to monitor for Vinci include macro trends, political developments, operational business trends, and capital allocation decisions.
Despite potential short-term market volatility, Bernstein views the current share-price weakness as an opportunity to build positions in Vinci stock.
Regarding Tesco, Bernstein has assigned an "outperform" rating with a price target of £4.30. Tesco’s strength in the UK market is a significant factor in this positive assessment, with the company holding a 28% market share and a 46% share of the profit pool.
Bernstein analysts point out that Tesco has consistently gained market share over the past five years, and the UK’s competitive environment is seen as particularly favorable, characterized by rational pricing and Tesco’s effective strategies like Aldi Price Match and Clubcard Prices.
The analysts believe that Tesco’s new strategies have allowed it to maintain an edge, with competitors like ASDA posing a limited threat.
Tesco’s financial performance has been strong, marked by high margins between 4% and 4.5%, consistent market share growth, and efficient cash return to shareholders through buybacks.
The company’s management team is considered high quality, demonstrating a clear understanding of their objectives.
Bernstein also views Tesco’s valuation as attractive, with a price-to-earnings ratio of around 11x. Their EPS estimates for Tesco’s FY25 are 9% higher than consensus estimates.
The analysts also anticipate the potential for Tesco to execute further buybacks, building on the £700 million buyback planned for FY25, given the company’s strong free cash flow generation.
Turning to Bunzl, Bernstein has also named it a "best idea" for the second quarter of 2025, with an "outperform" rating and a price target of 3,700 GBp.
Bernstein analysts express confidence in Bunzl’s path to achieving double-digit margins. The current share price, trading around 14x forward PE, is seen as an attractive entry point.
While Bunzl’s organic growth declined by 2% in 2024, impacted by deflationary pressures and lower volumes in North America, Bernstein anticipates a recovery.
Drawing parallels with the positive impact of tariffs in 2018-2019, they believe that pricing will become a positive driver for organic growth.
The extent of this benefit is dependent on potential changes in U.S. tariff policies. Bernstein’s outlook for Bunzl is supported by expectations of positive earnings momentum, driven by margin improvements and efficient capital allocation.
The company’s focus on acquisitions with 10-15% EBITA margins is expected to further enhance profitability.
Bernstein also flags Bunzl’s effective capital allocation, including share buybacks, and notes that consensus models may not fully account for the potential of M&A to boost EPS and margins.