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Kingfisher (LSE: KGF) saw a 5% share price rise Tuesday morning (25 November) after raising its full-year profit guidance on the back of a strong third quarter.
The company now expects to report adjusted profit before tax of between £540m and £570m. And that’s a significant improvement on previous guidance for something near the top end of £480m to £540m.
The owner of B&Q and Screwfix also says it’s on track to complete its £300m share buyback programme by March 2026. It’s already returned £175m by that route so far.
CEO Thierry Garnier praised “performance in core and ‘big-ticket’ categories“, adding: “B&Q, Screwfix and Iberia continue to strongly outperform their markets.”
Kingfisher shares are now up 23% so far in 2025.
Mixed European bag
The UK and Ireland made up the bulk of the quarter’s revenue gains, up 4%. France and Poland, the company’s next two largest markets, saw revenue dips of 2.6% and 1.2%, respectively.
Overall, revenue was pretty much flat. It seems the rise in profit guidance is, at least in part, down to “being disciplined on margin and costs“. And that’s also led to the board maintaining its free cash flow target of £480m to £520m.
Careful cost management can only take a company so far. And long-term future growth ultimately has to come from growing sales and revenue. So what do forecasts look like?
Strong analyst outlook
Forecasts do in fact suggest healthy growth over the next few years. They show earnings per share set to rise a further 30% by 2028, from the solid earnings expected this year.
Kingfisher’s historic price-to-earnings (P/E) ratio looks a bit toppy, at 25 based on 2024/25 full-year results. And we’re looking at a forecast multiple of 14 for the current year. That’s close to the long-term FTSE 100 average, and might not exactly make the stock look like a screaming buy.
But if forecasts come off, we’d see the P/E drop to around 10.5 by 2028. Couple that with an expected dividend yield of 4.2%, and I can see a stock worth considering for long-term growth here.
Uncertain economics
The biggest danger right now is possibly the still-shaky economic outlook across the UK, Ireland and Europe. And I suspect that might be why analysts have a Hold consensus on the stock with a price target only around the current level. A couple of them, however, have started to sound a bit more upbeat.
There’s also the cyclical nature of Kingfisher’s business, being tied strongly to the disposable income in people’s pockets. Some of the products it sells are generally among the easiest to forego when times are hard.
On balance, I’m optimistic. If the economy strengthens, if interest rates fall, if the home improvement business picks up, and if forecasts come good… it would make four ifs. But I see a decent chance of them all happening. Kingfisher is on my list of Stocks and Shares ISA candidates.
This story originally appeared on Motley Fool
