On Wednesday, CFRA issued a rating change for Kingfisher Plc (LON:KGF:LN) (OTC: KGFHY), downgrading the stock from Sell to Strong Sell, while increasing the price target to GBP2.40 from GBP2.20. The revision reflects a forecasted enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 6.0x for the fiscal year ending January 2025.
This multiple represents a premium over Kingfisher's five-year historical average of 5.5x. The adjustment is attributed to the anticipated improvement in the U.K. housing demand.
Kingfisher reported first-half fiscal year 2025 revenue of GBP6.76 billion, which was close to the consensus estimate of GBP6.81 billion. However, the company's like-for-like sales fell short of expectations, coming in at -2.4% compared to the anticipated -2.0%. The analyst noted that Kingfisher's retail profit in the U.K. and Ireland during this period, which amounted to GBP325 million, included a one-time refund at B&Q of approximately GBP25 million.
Consequently, the adjusted profit before tax (PBT) target for Kingfisher has been increased to a range of GBP510 million to GBP550 million for FY 2025, up from the previous range of GBP490 million to GBP550 million. This revision suggests a potential slight improvement over the current consensus forecast of GBP509 million for the company's PBT.
The downgrade to Strong Sell was primarily driven by concerns that the market has not fully accounted for the weakening consumer sentiment in France. According to CFRA, current consensus estimates may be overly optimistic, given the economic conditions. The analyst also revised their earnings per share (EPS) estimates for Kingfisher, lowering the FY 2025 projection to GBP0.21 from GBP0.23 and the FY 2026 estimate to GBP0.23 from GBP0.25.
In other recent news, Kingfisher Plc has seen a flurry of analyst activity. Deutsche Bank has raised its price target for the home improvement company from £3.10 to £3.50, maintaining a Buy rating. This adjustment follows Kingfisher's strong margin and cash flow management, prompting an increase in their profit before tax (PBT) and free cash flow (FCF) guidance.
Deutsche Bank's revised forecast places Kingfisher's FY25e PBT at £540 million and FY26e PBT at £551 million, indicating an approximate 20% year-over-year growth.
In contrast, Citi has downgraded Kingfisher's stock from Buy to Neutral, keeping the stock price target at £2.92. This change is due to concerns about persistent weakness in the French market and declining consumer sentiment trends in Poland. Despite this, potential profitability improvements in the French market and increased trade penetration across the group could lead to a structural re-rating of the company.
These recent developments illustrate the varying perspectives of analysts on Kingfisher's financial trajectory, providing investors with a broader picture of the company's performance and potential.
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