Broker snap: Halfords to outperform

10th Jun 2010 12:35

Car parts and cycles retailer Halfords is a good defensive play but it also has plenty of growth potential, KBC Peel Hunt reckons."Management has set out a target of delivering average annual EPS [earnings per share] growth of 15% going forward, a measure that suggests material upside to our medium-term estimates," notes KBC Peel Hunt analyst John Stevenson. The broker is forecasting EPS growth of 16.5% for fiscal 2011, followed by two years of 7% growth rates."The company is clearly committed to deliver further acquisition targets over the medium term, while we see scope for the rebranding of Nationwide [Autocentres} under the Halfords umbrella to drive a significant footfall gain," the broker says.Based on KBC projected figure for EPS for 2011, the stock is trading on a price/earnings ratio of 10.8. "With upgrade potential, despite the headwinds of higher taxation and spending cuts, we expect Halfords to continue to outperform the retail sector and deliver absolute share price gains," KBC predicts.