Broker snap: Kingfisher to re-test year's best levels, says Galvan

21st Oct 2013 11:14

Galvan Research has marked DIY retailer Kingfisher as a 'buy', recommending investors to snap up shares on the back of weather-related weakness. The stock has now fallen by 9% since its first-half report on September 11th when the B&Q and Screwfix owner said that depressed consumer confidence and cold weather was to blame for reduced profits.Although sales grew 4.3% to £5.7bn, which was helped by currency changes, profit before tax and exceptional items fell 1.6% to £365m. Chief Executive Ian Cheshire said after enduring a difficult first quarter where sales and profits were affected by record bad weather in Europe, the group was able to capitalise on the better weather in the second quarter to deliver a broadly flat result across the half."It seems surprising that in this day and age the weather can have such an influence on company profit margins, but this has been very much in evidence at Kingfisher over the first part of 2013," said Ed Woolfitt, Head of Trading at Galvan.However, he said that this 'weathering' of profits should reflect positively on the group's performance in the third quarter, given that the bad weather for the first part of 2013 was mainly offset by a "glorious summer"."This, coupled with the self-help initiatives to improve margins and the geographically diversified nature of the retailer's operations, should see a return to form for Kingfisher in the second half of the year, marking the stock out as a 'buy' at Galvan Research."The broker believes that a re-test of the stock's best levels of the year so far will materialise and gave a target price of 400p.The stock was down 0.8% at 382.1p on Monday morning.BC