Builders merchants Wolseley and Travis Perkins have been given a lift by upbeat comments from Morgan Stanley.
The bank has reduced its price targets on the companies to reflect the overall poor economic environment, but kept its overweight ratings. This has been enough to push Wolseley 50p higher to £14.31 - compared to Morgan Stanley's new price target of £19, cut from £20.50. Meanwhile Travis Perkins is up 25.5p to 840p, with the bank's target edged down from £12 to £11.70. Morgan Stanley's Jessica Alsford said:
We think both stocks have company-specific growth drivers and remain attractively valued – but we cut our forecasts and price targets following recent negative macro newsflow. Even in a low growth environment we would expect profitability to improve at Wolseley next year. A new focus on pricing and improving underperforming businesses should produce easy wins, despite the muted economic recovery. As such we forecast +40% 2010-13 earnings per share compound annual growth rate.BSS, by the way, is up 5.5p at 447.2p.
For Travis, the BSS deal [Travis agreed to pay around £560m for the plumbing and heating group in July] remains an attractive investment point. On our base case assumption of £25m synergies in 2013, the deal is mid single-digit earnings accretive next year. However, we seen potential for earlier and greater cost savings driven by better purchasing power and removal of duplicate overhead costs.
.jpg?w=600)
