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Wolseley's share price could more than double by 2015, says Citi

With more confidence about the margin potential, market share gain opportunities and the benefit of balance sheet options, Citi analyst Clyde Lewis reckons the world’s leading distributor of heating and plumbing products could reach the magic mark in just two and a half years.

This would mean more than doubling its current share price of 2,204 pence, up 28 pence or 1.3 per cent today.

Lewis said that margins in the US offer the most upside. “While margins across the group have improved, we now believe the North American business will make margins of 8 per cent by 2015, surpassing the previous peak of 7.2 per cent as the group benefits from rising market conditions, more market share, and tighter focus on costs,” he said.

Wolseley’s US business is also where Lewis sees the most market share opportunities.

“While Wolseley is the market leader in a number of its product categories and target markets, there are still plenty of geographic and customer market gaps across its portfolio but especially in N. America,” he added.

The analyst forecasts spending on acquisitions and capital returns to the tune of £2bn in the next three years on top of normal dividend payouts, which could boost 2015 earnings by as much as 25% taking his 2015 earnings per share estimates to 375-390 pence. “We expect US construction activity to recover by around 20 per cent in nominal terms by 2015 and while Europe looks more uncertain, we believe on a 3-year view, output will be higher than today,” said Lewis, who remains a ‘buyer’ with a 12-month target price of 2,850 pence.

Source : Builders’ Merchants News

20 June 2012
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Martin Elliott. Chief Executive - Home Hardware.

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