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On Tuesday, Barclays (LON:BARC) made a revision to Kingfisher (LON:KGF) Plc’s stock, downgrading it from Equalweight to Underweight, albeit with a slight increase in the price target from GBP2.75 to GBP2.80. This adjustment comes despite the stock’s impressive 36.7% year-to-date return and overall GOOD financial health score according to InvestingPro. The revision precedes the company’s anticipated first-quarter sales report for the fiscal year 2025/26, scheduled for May 28, 2025.
Kingfisher, which will detail sales for the three months ending April 30, is expected to post group like-for-like (LFL) sales at -0.4%, according to Barclays. However, this figure represents a modest increase of +0.4% when the calendar impact is excluded. This performance indicates the first instance of underlying LFL improvement for Kingfisher in a considerable period. InvestingPro analysis reveals the company maintains a healthy gross profit margin of 37.3% and strong free cash flow yield of 18%.
Despite this anticipated uptick in sales, Barclays does not foresee Kingfisher altering its existing financial year 2025/26 guidance for profit before tax (PBT) in the range of £480 million to £540 million, or for free cash flow (FCF) projected between £420 million and £480 million. The reasoning behind the downgrade, despite an expected improved top-line performance from Kingfisher, was attributed to modest estimate changes driven by foreign exchange factors, which led to the slight increase in the price target.
Barclays’ revised stance on Kingfisher reflects a cautious outlook for the stock, suggesting that the anticipated sales improvement may not be sufficient to warrant a more favorable rating at this stage. The new price target of GBP2.80 is only marginally higher than the previous target, indicating limited optimism for the stock’s growth potential. Kingfisher’s upcoming sales report will be closely watched by investors to gauge the company’s performance and its alignment with Barclays’ forecasts.
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