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Investing.com - Jefferies initiated coverage of Rexel (EPA:RXL) with a Hold rating and a price target of €28, representing a 4% total shareholder return potential, according to a research note released on Sunday.
The investment firm expects organic growth to accelerate into 2026, driven by recovery in European residential markets and continued strength in U.S. data centers, which represent approximately 12% of Rexel’s U.S. sales.
Jefferies also noted that pricing support should improve after a significant deflationary cycle in PVC and solar that is expected to end by year-end.
Rexel’s management plans to enhance shareholder returns through M&A activity targeting 2-3% growth contribution annually, along with €50-150 million in share buybacks and a dividend yield exceeding 4%.
The company maintains a net debt to EBITDAaL ratio of 1.8x, with Jefferies expecting slower activity into 2026 as Rexel approaches its target of approximately 2x.
Despite these positive factors, Jefferies believes the market has already priced in a strong recovery, with consensus estimates showing 100 basis points faster growth than Jefferies’ projections and a significant 40 basis point step-up in EBITA margins.
The firm identified risks related to Rexel’s high exposure to France and Germany, which represent two-thirds of European sales and one-third of group sales.
Jefferies values Rexel at 11 times its 2026 estimated earnings, in line with the company’s long-term average, noting that Rexel’s deeper valuation discount compared to U.S. peer Wesco International and European capital goods companies appears justified given the sector’s significant improvement in operating metrics and Wesco’s higher exposure to the U.S. and data center segment.