Jefferies downgrades Wolseley to 'hold'

It pointed out the shares have risen 17% from their post-Brexit lows and now sit 8% higher than before the UK’s vote to leave the European Union.

“Having heard from three merchants post-Brexit and having seen another month’s macro data we would prefer exposure to the UK-focused companies, where we believe the risk/reward opportunities are more favourable.

“Overall, it is our sense that the immediate share price response to the UK focused names has been an overreaction and, at this stage, trading appears to be better than feared. To that end, with the UK focused names still down 23% post-Brexit, we would prefer exposure to these companies, rather than Wolseley.”

Jefferies noted there have been three updates from the sector post-Brexit. Demand weakened for the traditional merchants in the second quarter and was negative for Grafton in June, but Travis Perkins has been reporting improving trends in July, it said.

The bank said consumer-focused businesses appear to be performing better than those exposed to the wider construction space.

“Howden has seen only a small slowdown in their volume in July and Travis’ consumer division continues to see mid-single digit growth in the first half.

“Perhaps the impact of Brexit on the UK at large is being overstated by those in the London bubble. The housebuilders are telling us that, post an immediate one-week slowdown, reservation rates have returned to previous levels.”

Jefferies said that while the impact of Brexit means remains unclear, it is increasingly confident that it does not mean a return to the volume declines of 2008/9.

At 0855 BST, Wolseley shares were down 1.4% to 4,118p.