JPMorgan downgrades Wolseley on valuation

JPMorgan Cazenove downgraded Wolseley to ‘neutral’ from ‘overweight’ and cut the price target to 4,100p from 4,300p on valuation grounds.

“Prior to Q3, Wolseley had outperformed by 10% year to date. Despite the fact the stock was approaching what we viewed as fair value, it was our expectation that outperformance could continue, driven by an inflection in LFLs at Q3 and positive US news flow,” the bank said,

However, it sad slower current growth reported last week has promoted it to cut its full-year 2017 earnings per share estimates by 2%.

JPM said that while the stock is down 8% in the last three days, there is still only 9% upside to its new target price.

“Given that we do not view the valuation as particularly compelling and we struggle to think of near-term positive catalysts, we are downgrading.”

It noted that the company is due to report full-year results on 27 Sept and said that barring a sharp improvement in commodity pricing or industrial data, there are unlikely to be any positive catalysts between now and then.

At 0820 BST, Wolseley shares were down 1.1% to 3,704p.