US stock futures dip as Trump’s firing of Cook sparks Fed independence fears
Investing.com -- UBS has initiated coverage on Kingfisher (LON:KGF) Plc with a "neutral" rating and a price target of 280p, in a note dated Monday.
This decision reflects a balanced view of Kingfisher’s potential, factoring in strength in the U.K. but tempered by challenges in France.
While the U.K. market presents promising prospects, particularly due to a likely recovery in housing transactions, UBS analysts expressed caution regarding the French business.
This includes Kingfisher’s underperforming Castorama brand, which has faced consistent market share losses to competitors like Leroy Merlin.
Despite a strong Q1 in the U.K., which might indicate the beginning of a housing recovery, UBS remains skeptical about the timing and extent of recovery in France.
The U.K. segment, particularly through Screwfix and B&Q, is poised for growth. UBS sees further profit opportunities from a series of initiatives aimed at increasing market penetration.
These include growing trade sales in B&Q, expanding Screwfix stores, and rolling out more services like Click and Collect.
However, expectations for profit growth in France are less optimistic. The analysts foresee a more gradual turnaround, projecting a modest improvement in French margins.
UBS’s stance on Kingfisher reflects broader concerns about the recovery trajectory in France, where consistent performance improvements have been slow.
While margins in France remain at low points, UBS analysts expect only a slight recovery to around 2.7% by FY28.
This slower pace of recovery, alongside market share losses, means that a significant portion of analysts’ projected earnings growth (around 36% over the next three years) may not materialize as hoped.
The analysts note that while Kingfisher’s U.K. operations appear on track for growth, the French market remains a wildcard.
With this in mind, UBS has set a price target of 280p, indicating potential upside from the current market value of 279p, though this depends largely on how the company navigates its French recovery and capitalizes on the U.K. housing market recovery.
Kingfisher’s stable dividend and cash flow are additional positive factors, but UBS remains cautious about the execution risks involved, particularly in France.
The upcoming H1 results in September are expected to provide more clarity, with analysts anticipating a PBT broadly in line with consensus expectations.