Fair Value Lowered For Kingfisher Stock

Poor consumer sentiment in Europe is likely to keep the company’s outlook depressed

Matthew Donen 26 November, 2024 | 10:28AM
Facebook Twitter LinkedIn

Ilustraciones de mercados que suben y bajan

No-moat Kingfisher reported a disappointing third-quarter trading update. Organic revenue declined 1.1% year over year, missing company-compiled consensus.

To make matters worse, proposed regulations in the UK and France are expected to hit profitability in 2025 due to higher wage costs and taxes. The combination of bad news sent shares 15% lower on Nov. 25. We’ve lowered our fair value estimate by 8% to £2.67 per share to reflect lower profitability in the short- and medium term. Shares appear fairly valued.

Sales from big-ticket items remained soft during the third quarter, declining 4% year over year, albeit with some signs of improvement. Average selling prices are flat year on year with improved volume trends versus the second quarter, which should support profitability at similar levels to the first quarter. Geographically, performance in France remains weak, declining 4% year over year in constant currency. Poor consumer sentiment in the region is likely to keep the outlook depressed.

Management expects a £31 million headwind in financial 2025/26 due to the hit from higher employers' National Insurance contributions detailed in the UK Budget before any mitigation measures. In France, amendments to the social tax are expected to have a £14 million hit during the same period, which will place further pressure on the group’s poor profitability.

The upper end of Kingfisher’s profit-before-tax guidance was lowered by £10 million to between £510 million and £540 million, which falls within our £540 million estimate for financial 2024/25.

Key Morningstar Metrics For Kingfisher KGF

Economic Moat: None
Morningstar Rating: 3 stars
Fair Value Estimate: £2.67
Morningstar Uncertainty Rating: Medium
Sector: Consumer Cyclical

Kingfisher Stock vs Morningstar Fair Value Estimate


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Kingfisher PLC258.10 GBX-0.39Rating

About Author

Matthew Donen  is a sernior analyst for Morningstar

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures