Brambles (ASX:BXB) is expected to see a modest near-term earnings headwind from rising transport and diesel costs, though impacts should be temporary and largely offset over time, Jefferies said in a Thursday note.
Jefferies noted that the company's exposure to Middle East operations remains minimal, with CHEP's activity in Saudi Arabia and the United Arab Emirates accounting for fewer than 600,000 pallet issues annually, and it sees no material disruption to pallet flows from regional geopolitical tensions.
The equity research firm said elevated transport costs in North America are pressuring the company's margins in the near term due to higher fuel costs and a lag in passing them through, despite fuel recovery mechanisms in many contracts.
The research firm highlighted that planned overhead savings could be brought forward to ease fiscal second-half cost pressures, while lower diesel prices later may offset any cost timing shifts into fiscal year 2027, leading the market to likely overlook these fluctuations.
The research firm added that despite near-term dynamics, the company's guidance remained unchanged, with expected revenue growth of 3% to 4%, earnings before interest and taxes growth of 8% to 11%, and free cash flow of $950 million to $1.05 billion.
Jefferies maintained a hold rating on Brambles and lowered the price target to AU$21.02 from AU$21.40.