Goldman initiates on Wolseley at 'neutral'
Goldman Sachs has initiated Wolseley, the FTSE 100-listed distributor of heating and plumbing products, with a ‘neutral’ rating and target price of 4,600p.
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The bank said it believes Wolseley is strongly positioned with first and second ranks across 80% of its main markets. Goldman also thinks the company’s B2C e-commerce offering will continue to add to its growth opportunities going forward.
“Over the last four years the company has managed to significantly improve its returns profile owing to restructuring efforts and strong growth in its core market, the USA,” Goldman said.
“We believe this is fairly reflected in its valuation and combined with mixed leading indicators outside the USA, we see limited upside to our 12-month price target of 4,600p.”
Goldman said risks to Wolseley include macro-economic changes, the reversal of recent foreign exchange trends, failure to execute on restructuring and acquisitions and pricing pressure from online peers.
The bank noted that Wolseley has reduced its exposure to new construction but its Renovation, Maintenance & Improvement (RMI) end-markets remain closely correlated to macro-economic developments.
“US leading indicators are broadly stable, while the UK & Nordics (predominantly Denmark) paint a more mixed picture.”
Shares rose 2.29% to 4,520p at 0924 BST on Tuesday.