Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Travis Perkins downgraded by UBS as analysts question investment pay out potential

The Swiss investment bank said “a lack of clear market outperformance” on several investments meant that returns would be “weaker than initially anticipated”
Travis Perkins logo
UBS analysts also cut their target price on the stock to 1,515p from 1,715p

Travis Perkins PLC (LON:TPK) has been downgraded to ‘Neutral’ from ‘Buy’ by analysts at UBS amid concerns around the potential pay out of sUBStantial investments made by the firm.

In a note to clients, the Swiss investment bank said “a lack of clear market outperformance” on several substantial investments made by the FTSE 250 builder's merchant between 2014 and 2017 meant that returns on these investments would be “weaker than initially anticipated”.

READ: Travis Perkins repeats 2018 guidance despite hit to sales from Beast from the East

Analysts added that “accelerated cost cutting” would be required in the second half of the company’s financial year due to weather related delays in the earlier periods which would leave the risk-reward balance “unfavourable on earnings outlook”.

“We expect a 10% EBITA [underlying earnings] drop in [the first half] to £170mln (incl £5mln of property profits) which requires +11% EBITA growth in [the second half] (+16% ex property profits) in order to hit guidance of £380mln…We think cost cutting will need to be stepped up for [financial year] guidance to be held]”.

Considering these forecasts, UBS analysts also cut their target price on the stock to 1,515p from 1,715p.

In April, Travis Perkins reiterated its guidance for the full-year despite a hit to sales from the ‘Beast from the East’ across February and March which battered the UK and caused decreased footfall across the retail sector.

In mid-morning trading Thursday, Travis Perkins shares were down 2.8% at 1,362.5p.

View full TPK profile View Profile

Travis Perkins Timeline

Related Articles

Patient and carer
August 24 2018
Despite issues from recent changes in social care policy, the company's latest set of numbers are pointing to a much more positive outcome

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use