Canaccord Genuity lifts target price on Wolseley ahead of Q1 update

Canaccord Genuity hiked its target on Wolseley ahead of the builders merchant's first quarter update.

All eyes would be on its performance in the US, the broker believed.

Nonetheless, while trading in the first three months of the year would benefit from its exposure to the States, analysts Aynsley Lammin and Matthew Walker advised clients not to expect any significant incremental improvement in underlying trading in the US.

In that same vein, other parts of the group had likely continued to face challenging conditions and a focus on acquisitions limited the margin for any capital returns this year, the analysts said in a research note dated 23 November.

Even so, Canaccord lifted its target on the stock from 4,320p to 4,600p mainly as a result of currency adjustments´ positive impact on the firm´s earnings per share.

They estimated that changes in FX rates would provide a roughly 16% boost in the first quarter.

The broker expected to hear more related to the restructuring of the UK business, especially regarding the pipeline for possible acquisitions.

Any news on progress in finding a new finance chief would also be welcome, Canaccord said.

"The overriding issues are likely to relate to the US outlook in areas such as volume growth, trends in Industrial work & price deflation trends (which should be improving from here)."

At about 15.5 times´ the estimated 2017 price-to-earnings multiple, the stock was broadly trading where it had been over the last few years, the broker said.

Canaccord´s recommendation on Wolseley was kept at 'hold'.