As the share price of Kingfisher falls in the fall of the Budget, should I buy?
Image source: Getty Images
After Q3 results were posted on Monday (November 25), i King fish (LSE: KGF) share price fell 14%.
The owner of B&Q posted the sale on his own terms, saying “performance is better in August and September” in the words of CEO Thierry Garnier. But the company has to lower its full-year outlook, due to “increased consumer uncertainty in the UK and France in October, related to government budgets in both countries.”
The stock price has been doing well in 2024, so far.
Low direction
The review told us: “We believe that the UK & Ireland and Polish markets are currently tracking the high level of our conditions. We believe that the French market continues to track the bottom line.“
As a result, Kingfisher has strengthened its guidance range for the full year. The company had previously put pre-tax profits at between £510m and £550m. And it just dropped to a £510m to £540m range.
But wait, that’s hardly a change. Does that justify all the doomsday headlines I read today? Or a big price drop? I do not think so.
Healthy finances
When I look at the financial situation, I see reasons to be happy. The company is on target to hit the £120m target to reduce building costs this year.
And with “a significant year-on-year reduction in net assets” as previously planned, free cash flow guidance remains at £410m to £460m.
A recent report also said: “We are on track to complete our current £300m share buyback program by March 2025 and remain committed to returning a surplus to shareholders.“
Dividend predictions
I don’t expect any updates on earnings until the FY results in March. But the interim dividend was paid at 3.8p per share, as the company spoke of its intention to “increasing the common dividend continuously over time.”
The way of looking at money seems to be strong. And with this year’s surplus used for share buybacks, I’m reasonably confident of a full-year profit.
Forecasts suggest a 4.8% yield now that the share price has dropped. And I find that attractive in stocks that are selling, especially since it looks like earnings coverage should be good and going up.
Investor reaction
I think the drop in stock prices shows how stock market investors can be these days. Kingfisher only lowered the top end of its profit guidance, not by much.
It’s in the mid-range at just £5m, which isn’t unusual for a company of this size.
Admittedly, the idea of selling is still difficult. And Kingfisher stores sell products that we can’t do much unless our pockets are tight.
Will I buy?
This decline in the price of Kingfisher shares tempts me, despite the short-term risks. One of those dangers is that profit warnings (if we can really see this as a warning) usually come in twos or threes. The next few months are worth watching.
For now, however, my wish list is led by the financial stocks I like best.
Source link
