RBC Capital Markets has taken a more cautious stance on UK building material distributors for 2026, citing weak recent data and “soft FY25 exit rates” that leave little near-term support from the market.
The broker cut FY26 and FY27 adjusted EBIT forecasts by about 5% on average across its coverage of Grafton Group, Travis Perkins, Howden Joinery and SIG.
RBC pointed to a 1.1% fall in total UK construction output in the three months to November. It also noted the UK construction PMI remained in contraction in December, while buyer enquiries and consumer confidence stayed subdued.
The analysts said there are some offsets. Mortgage rates have started to come down, RICS sales expectations improved in the December survey, and PMI business activity expectations rebounded to a five-month high.
Within the sector, RBC said its preferred names are Grafton Group PLC (ISE:GFTU) and Travis Perkins (LSE:TPK).
Grafton Group
Grafton Group remains a preferred name at RBC Capital Markets, but the broker has become more cautious on 2026 as UK construction indicators stay soft. RBC kept its Outperform rating but cut its price target to 1,170p from 1,190p after trimming forecasts, arguing the near-term backdrop is still doing little to help sentiment.
Forecast tweaks were focused on growth and profit leverage. RBC lowered its FY26 and FY27 like-for-like sales growth assumptions to 2% and 3.5% and cut adjusted EBIT by about 4% to £186 million (FY26) and £203 million (FY27).
Ireland and Spain are seen as performing well, while Great Britain and Northern Europe remain challenged, though RBC said those regions still matter most for operating leverage in any recovery. The bull case remains balance sheet “firepower” of around £300 million in FY25, rising to about £450 million by FY27, which RBC said could lift adjusted EPS by 10% to 20% via buybacks and bolt-on deals.
Travis Perkins
RBC Capital Markets is also sticking with Travis Perkins as a preferred pick, but it is bracing for “little help from the market” in 2026, given weak UK construction indicators. The broker reiterated Outperform and cut its price target to 850p from 865p after reducing earnings forecasts.
The downgrade to numbers is driven by a softer volume view and persistent cost pressure. RBC now assumes 0.00% Merchanting volume growth in 2026, down from just under 2%, pulling FY26 and FY27 adjusted EBITA estimates down by about 7%.
It said further savings will be needed just to offset roughly £35 million of cost inflation from rent, rates, national insurance and wages. Even so, RBC sees a better medium-term set-up under new chief executive Gavin Slark, expecting operational and commercial improvements and tighter capital allocation, alongside potential share gains given the group’s strong balance sheet versus more leveraged, private equity-owned competitors.
Howden Joinery
Howden Joinery Group (LSE:HWDN) is “a cut above” peers on quality, RBC Capital Markets said, but the broker remains cautious on the growth implied by market expectations for 2026 and 2027. RBC reiterated Sector Perform and trimmed its price target to 890p from 900p after lowering forecasts.
RBC expects Howdens to meet FY25 consensus, pencilling in revenue growth of about 3.3% and profit before tax of around £331 million. It said that it would compare well with an underlying UK kitchen market it estimates was down roughly 3%, supporting the idea of ongoing share gains.
The debate, in RBC’s view, is what comes next: it sees consensus as too optimistic for FY26, where the market looks for 5.00% sales growth.
RBC cut its own FY26 and FY27 sales growth assumptions to 3.70% and 4.90%, driving a roughly 4.00% reduction to adjusted EBIT estimates, while still highlighting structural strengths such as depot expansion, higher revenue per depot and cash generation that underpins buybacks and dividends.