Peel Hunt has identified the Cumbernauld-based firm – which is holding its annual general meeting this Friday – as one of the stock market companies that could thrive during a downturn.
The broker believes AG Barr’s core earnings should prove “very resilient”, stating that Irn-Bru is “first on many consumers’ shopping lists” in Scotland, and adding that its Funkin cocktail brand should benefit from greater at-home social drinking as people look to cut spending.
“The company also has good cost cover in place for the current year, protecting margins in the short term,” Peel Hunt points out.
The broker also takes the view that AG Barr could take advantage of other firms struggling during a recession. It pointed out that following the financial crisis, the drinks firm was able to use its strong balance sheet to buy Rubicon. “New acquisition opportunities could appear in a distressed landscape,” Peel Hunt said.
The industrials and housing sectors are also seen as being well-placed to navigate a downturn, with companies including Spirax-Sarco, Halma and Diploma highlighted, along with housing firms with high infrastructure exposure, such as Keller, Breedon, SigmaRoc, Alumasc and Van Elle.
Peel Hunt also said that if the UK economy does fall into recession, “it is likely to be a very unusual one”, adding in the research note: “In a normal recession, businesses reduce employment levels to match lower demand and maintain margins, but the issue currently is more the struggle to fill vacancies.”