Citigroup cuts Travis Perkins to 'neutral', says valuation is full

5th Aug 2015 13:36

(ShareCast News) - Citigroup downgraded Travis Perkins to 'neutral' from 'buy' but raised its price target to 2,300p from 2,190p.The bank said the downgrade was a valuation call, as the shares have enjoyed a strong bounce since the start of the year and now reside on a relatively full multiple.The target price increase, meanwhile, is due to slightly higher target multiples, reflecting the recent re-rating of the sector and wider market."We have used target multiples slightly higher than long-run averages to reflect the group's growth potential as it progresses on its strategic measures."Citi said management is making good progress on strategic initiatives and the group looks well positioned to drive market share gains and deliver higher returns against a positive macro backdrop.It expects the company to deliver an earnings per share compound annual growth rate of around 11% over 2015-2017 as it extends its market-leading position. However, it said this is largely priced into the shares.Citi added that first-half results were a slight miss in terms of operating profit.At 1425 BST, Travis Perkins shares were down 2.7% at 2,158p.