Mindful Money’s Monday share tips: Kingfisher, Wolseley & Compass

24th March 2014

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Investors will be eager to hear how the UK property market’s renaissance has bolstered the outlook at B&Q owner Kingfisher when it reports its full year results on Tuesday writes Philip Scott.

While the firm may have enjoyed a share price rise of 44% over the past year, and analysts at brokerage Jeffries have just reaffirmed their ‘buy’ rating,  shareholders will want to see if the rise in mortgage lending in the UK, supported by the Government’s Help to Buy programme is reflected in its sales growth and margin performance.

However what is happening to the business beyond the UK will equally be of interest. Sheridan Admans, investment research manager at The Share Centre, who rates the stock a ‘hold’, says: “Lacklustre trading conditions prevailing in Europe are likely to continue to hamper continental operations. Investors will be interested to see what impact falling GDP in China is having on its operations there, and with recent press speculation that the company might exit the region altogether investors will take particular note.”

Hargreaves Lansdown equity analyst Keith Bowman, points out that pre-tax profit for the year, aided by some cost-cutting at the group is forecast to rise by around 3% to £737m. He adds: “The group’s operations in Russia may generate additional management comment given events in the Ukraine. In all, and buoyed by both a recovering UK housing market and hopes for an eventual return of cash, analyst opinion currently points towards a ‘buy’.”

Wolseley publishes its second quarter numbers on Tuesday and investors will be hoping for signs of improvement in the plumbing giant’s European business. The group’s shares up by 4% over the past year and by 1% over six months, are rated a ‘buy’ according to the broker consensus on share data hub Digital Look. Admans, who for his part is currently recommending investors ‘hold’, says: “They will also be expecting more good news from the important US operations on the back of an improving housing market. Other areas that management may focus on could be further cost cutting and the effect of recent foreign exchange movements.”

The worlds biggest contract caterer, Compass, reports its first half trading update on Thursday. Both the company’s North American and emerging markets businesses are likely to report further progress asserts Bowman.

He says: “Expanding stabilisation of trading for its European and Japanese business could also be highlighted, with management’s firm focus on group wide cost reduction again potentially proving a theme. Less favourably, currency headwinds created by a stronger pound will again likely prove a management concern, whilst ongoing tough conditions for the Australian mining sector may have once more dragged on sales for its emerging markets business.”

The firm’s shares have firmed by 6% in the past six months and by 8% over the last year and prior to the announcement and with Compass still seen as offering an attractive combination of defensive growth characteristics, analyst opinion continues to denote a ‘buy’, notes Bowman.

Global wholesale broking group Icap reports its latest trading update to the market on Tuesday 1 April. With its  shares down by 11% in the past three months, the analyst consensus is pointing to a ‘hold’, as is Admans. He says: “Recent trading updates have given a mixed view on the markets the group are active in. Revenue growth has been under pressure as banks cut back on trading activities and there have been new regulations to contend with so investors will be keen to see the impact of this. Investors should expect the CEO to remain cautious for the near term as concerns over the Ukraine, China and emerging markets remain.”

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