Goldman Sachs has trimmed its rating on Kingfisher (LON:KGF), arguing that declining sales will limit near-term growth at the company, WebFG News has reported. The comments came after the blue-chip group updated investors on its third-quarter performance last week, posting a fall in sales amid continued poor performance in France.
Kingfisher’s share price has jumped in London in today’s session, having added 2.41 percent to 246.80p as of 10:27 GMT. The stock is outperforming the broader market rally which has seen the benchmark FTSE 100 index add 0.97 percent to 7,020.10 points so far today. The group’s shares have given up more than 22 percent of their value over the past year, as compared with about a five-percent fall in the Footsie.
Goldman Sachs trims stance on Kingfisher
Goldman Sachs trimmed its rating on Kingfisher from ‘buy’ to ‘neutral’ on Friday, slashing its price target on the shares from 350p to 270p.
“We believe consistently declining profitability at Castorama will offset any incremental gross margin uplift at the other formats,” the analysts pointed out, as quoted by WebFG News, adding that while better online capabilities and differentiated products/attractive price should provide a sustainable competitive position for the DIY retailer across multiple markets, earnings growth in the near term will remain unattractive.
The broker further reduced its underlying pre-tax profit estimates by four percent, 10 percent and 13 percent for FY19/20/21E, reflecting lower like-for-like sales growth and continued margin pressure in France.
Other analysts on blue-chip retailer
JPMorgan Chase & Co, which is ‘underweight’ on Kingfisher, lowered its price target on the stock from 240p to 220p last week. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 312.50p.