On Monday, UBS revised its stance on Kingfisher Plc (LON:KGF:LN) (OTC: KGFHY), raising the stock from a 'Sell' to a 'Neutral' rating. The firm also increased the price target for Kingfisher to £3.40, up from the previous target of £2.01. The adjustment comes amid expectations of sales growth and margin improvement for the home improvement company, particularly in the UK and Poland markets.
The UBS analyst noted that Kingfisher is well-positioned to capitalize on a potential housing market recovery, which is anticipated to be modestly supportive in fiscal year 2026 for both the UK and Poland. The analyst's tempered enthusiasm is due to current weak market conditions in France and a significant 35% increase in Kingfisher's share price over the last three months.
According to UBS, Kingfisher's sales are projected to experience a dip in fiscal year 2025, followed by an increase in fiscal year 2026, largely driven by a recovery in the UK and Poland. This outlook is supported by an anticipated improvement in housing transactions within a context of reduced interest rates.
Kingfisher is expected to outperform, benefiting from a strong Trade/eCommerce offering, industry consolidation, and robust consumer metrics. Nonetheless, UBS predicts flat year-over-year sales in France for fiscal year 2026, with a potential downside risk due to weaker consumer spending and competitive pressures.
In terms of profitability, UBS forecasts a profit before tax (PBT) of £532 million for fiscal year 2025. They anticipate a margin expansion of 40 basis points in fiscal year 2026, driven by sales leverage, self-help measures, and relaxed wage pressures, leading to a projected PBT of £600 million.
With these estimates largely aligning with consensus and Kingfisher's shares trading at 14.6 times the 12-month forward price-to-earnings ratio, the risk/reward balance is seen as neutral.
UBS suggests that an improved performance in France and a faster UK market rebound could prompt a more positive outlook for Kingfisher's fiscal year 2026.
In other recent news, Kingfisher Plc reported first-half fiscal year 2025 revenue of GBP6.76 billion, nearly meeting the consensus estimate of GBP6.81 billion. However, the company's like-for-like sales fell short of expectations, coming in at -2.4% compared to the anticipated -2.0%.
CFRA has downgraded Kingfisher's stock from Sell to Strong Sell, citing concerns about the unaccounted weakening consumer sentiment in France. Despite this, they increased the price target to GBP2.40 from GBP2.20, based on the anticipated improvement in U.K. housing demand.
In contrast, Deutsche Bank (ETR:DBKGn) has raised its price target for Kingfisher from £3.10 to £3.50, maintaining a Buy rating. This adjustment follows Kingfisher's strong margin and cash flow management, leading to an increase in their profit before tax (PBT) and free cash flow (FCF) guidance.
Meanwhile, Citi has downgraded Kingfisher's stock from Buy to Neutral, keeping the price target at £2.92, due to concerns about persistent weakness in the French market and declining consumer sentiment trends in Poland. These recent developments provide investors with a comprehensive view of the company's performance and potential.
InvestingPro Insights
Kingfisher Plc's (KGF:LN) (OTC: KGFHY) recent market performance and financial metrics provide a nuanced view of the company's current standing. According to InvestingPro data, Kingfisher has a market capitalization of $7.89 billion and is trading at a price-to-earnings (P/E) ratio of 17.65, which suggests that the stock may be valued at a premium when considering its near-term earnings growth. This is further echoed by a PEG ratio of 2.53 for the last twelve months as of Q2 2025, indicating a higher price tag relative to earnings growth.
However, Kingfisher's valuation implies a strong free cash flow yield, an InvestingPro tip that might interest investors looking for cash-generative businesses. Additionally, the company has seen a significant return over the last week, with a 11.51% price total return, and a high return over the last year at 62.52%, reflecting robust investor confidence in its stock. The company's price is also trading near its 52-week high, at 97.05% of the peak value.
These insights suggest that while Kingfisher is facing challenges in certain markets, as noted by UBS, its strong returns and cash flow position could be attractive to investors. For a more comprehensive analysis, including additional InvestingPro Tips, readers can explore the full suite of metrics and insights available on the InvestingPro platform. There are 10 additional InvestingPro Tips available for Kingfisher, offering a deeper dive into the company's performance and outlook.
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