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Citigroup ups Travis Perkins to ‘buy’ from ‘neutral’ on hopes for momentum in the UK housing market

“Strong price and demand momentum in the last two months shows signs of revival in the UK housing market following the recent election”

Wickes store
The US bank raised its target for the owner of the Wickes DIY stores chain to 1,900p from 1,700p

Citigroup gave a lift to Travis Perkins PLC (LON:TPK) shares on Thursday, upgrading its rating to ‘buy’ from ‘neutral’ after increasing its target price and estimates for the builders merchanting firm on hopes for momentum in the UK housing market.

The US bank raised its target for the owner of the Wickes DIY stores chain to 1,900p from 1,700p, with the shares currently trading at 1,721.50p, up 1.4% on Wednesday’s close.

READ: Wickes confident ahead of demerger though sales growth eases

In a note to clients, Citi’s analysts said: “Strong price and demand momentum in the last two months shows signs of revival in the UK housing market following the recent election.”

“The positive demand dynamics support expectations for sustainable volume growth across the business with earnings benefitting from higher operating leverage and our 2020-21e estimates factor in EPS CAGR of c.+11%.

“In addition we believe management remains disciplined on capital allocation decisions and we see scope for higher returns to shareholders over the medium term,” they added.

The analysts said they have increased their estimates for 2020-21 by around 7%-8%, factoring in higher volume growth with earnings benefitting from higher operating leverage.

They concluded: “We upgrade the stock to Buy (from Neutral) as we believe the group’s businesses are better positioned to take advantage of the current market backdrop and drive higher market share gains.”

Quick facts: Travis Perkins

Price: 979.2 GBX

LSE:TPK
Market: LSE
Market Cap: £2.47 billion
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