Kingfisher shares form inverse H&S, golden cross ahead of earnings

By:
on May 17, 2024
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  • Kingfisher’s stock recently formed a golden cross pattern.
  • It also jumped above the neckline of the inverse head and shoulders pattern.
  • The focus now shifts to the upcoming Kingfisher earnings.

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Kingfisher (LON: KGF) share price has continued its short squeeze this year as investors bet on its recovery. It surged to 270.5p this week, its highest level since March 2023. It has soared by over 36% from its lowest level in 2023.

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Kingfisher’s earnings ahead

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Kingfisher has become one of the biggest retailers in the UK. While its name is not well-known, its brands like B&Q, Castorama, ScrewFix, and TradePoint are well-known in Europe. Most of its sales are in the UK, Ireland, and France.

Unlike its peer brands like Home Depot and Lowe’s, Kingfisher’s business did not boom during the Covid-19 pandemic. Instead, it became one of the most shorted companies in London as its business slowed and profits narrowed.

Its recent annual results showed that total sales dropped by 0.6% in 2023 to £12.9 billion while its statutory post-tax profit crashed by over 20% to £345 million. It blamed its performance to headwinds in France and Poland where customer spending has been soft.

Therefore, the stock has rebounded this year as investors bet on its turnaround even after the company warned that its growth will be soft. Thierry Garnier, its CEO said:

“We are cautious on the overall market outlook for 2024 due to the lag between housing demand and home improvement demand.”

Kingfisher hopes its free cash flow (FCF) will come in at £450 million in FY 25/26 followed by £500 million in the following year. 

The next key catalyst for the Kingfisher’s share price will be its upcoming quarterly earnings scheduled for May 21st. Analysts expect that its like-for-like sales will be minus 2.7%, mostly because of its French business where they will drop by 5.3%. 

In the UK and Ireland, analysts expect the LFL sales will be minus 1.2% while in Poland they will drop by 2.2%. The median revenue estimate is £3.2 billion, down from £3.3 billion in the same period in 2023.

Kingfisher share price analysis

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Kingfisher share price

KFS chart by TradingView

Turning to the daily chart, we see that the KGF stock price has jumped sharply in the past few weeks. This rebound started after it formed an inverse head and shoulders pattern,  a popular bullish sign. 

It recently rose above the neckline of this pattern at 242.50p. Additionally, the stock has formed a golden cross pattern, where the 200-day and 50-day Exponential Moving Averages (EMA) made a bullish crossover. 

Kingfisher’s shares have moved to the resistance point at 270.50p, its highest swing on March 6th last year. Oscillators like the Relative Strength Index (RSI) have moved above the overbought level. Therefore, I suspect that the stock will retest the support at around 250p and then resume the bullish trend.

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