Wolseley gets a leg up from Citigroup upgrade

Wolseley got a boost after Citigroup upgraded the stock to ‘buy’ from ‘neutral’ and lifted its price target to 4,725p from 4,100p as it revisited the valuation in the context of a sector re-rating, balance sheet strength and potential for share gains and margin expansion.

Citi said it expects the company to deliver a three-year earnings per share compound annual growth rate of over 16%.

“While worries around rising US interest rates and slower market growth in the US may weigh on sentiment in the near term, we believe Wolseley is well-positioned to deliver strong earnings growth and value over the medium term, assuming a sustained macro recovery and employment growth in the US despite rising rates,” said Citi.

The bank said Wolseley is well positioned to continue gaining share in the US, underpinned by its strategy to develop its higher margin multi-channel capability, private label range and improvements in product breadth and depth and logistics capability.

In addition, it said the group’s healthy balance sheet and cash generation potential supports value-creating acquisitions and the potential for more special dividends.

At 0934 BST, Wolseley shares were up 1.1% at 4,255p, leading the FTSE 100.