Q3 Earnings Alert: These are the most overvalued right nowSee Overvalued Stocks

Rexel stock has upside despite lowered target, says Citi on US roll-up strategy

EditorEmilio Ghigini
Published 10/21/2024, 03:17 AM
RXL
-

On Monday, Citi analyst Martin Wilkie adjusted the price target for Rexel SA (RXL:FP) (OTC: RXLSF), reducing it to €31.00 from the previous €33.00, while still affirming a Buy rating on the stock. The revision reflects a continuous positive outlook on the company, despite a slight moderation in expectations.

Wilkie's stance on Rexel is based on what he views as a low valuation for a company that is on a path of structural improvement. This improvement is expected to come from organic productivity measures and from Rexel's potential role as a consolidator in the highly fragmented U.S. market. A recent takeover bid that was turned down is seen as further evidence of the company's underlying value.

The analyst anticipates that categories currently experiencing deflation, such as piping and automation, will start to stabilize, with some normalizing already and others expected to do so in early 2025.

Additionally, the negative impact on gross margins from solar deflation is predicted to lessen as solar becomes a smaller part of Rexel's business. Wilkie forecasts an improvement in EBITA margins, from 5.9% in 2024 to 6.1% in 2025.

Wilkie also noted that an acceleration in the implementation of Rexel's strategy, hinted at during the earnings call, could result in productivity benefits arriving sooner than anticipated.

This could also expedite the execution of a U.S. roll-up strategy that is accretive to the company's value. Although the 2025 EBITA forecast has been lowered by 8%, the analyst reiterates a strong upside potential for Rexel's shares.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.