Travis Perkins (LON:TPK) Releases Quarterly Earnings Results

Key Points

• Adjusted operating profit increased 6.3% to £67 million, driven by a 100-basis-point gross-margin improvement and cost reductions despite challenging trading conditions.
• Travis Perkins strengthened its balance sheet, moving from £103 million of net debt to £55 million of net cash before leases, while leverage fell to 1.9x.
• Management expects difficult market conditions to persist, with residential construction weakness, rising customer insolvencies and CCF deterioration posing risks; analysts’ consensus rating remains “Hold” with a GBX 616.80 price target.

Travis Perkins (LON:TPK - Get Free Report) issued its quarterly earnings results on Tuesday. The company reported GBX 15.10 EPS for the quarter, Digital Look Earnings reports. Travis Perkins had a negative net margin of 3.86% and a negative return on equity of 9.35%.

Here are the key takeaways from Travis Perkins' conference call:

• Adjusted operating profit rose 6.3% to £67 million despite difficult trading conditions, supported by a 100-basis-point improvement in gross margin and cost reductions.
• The group strengthened its balance sheet, moving to £55 million of net cash before leases from £103 million of net debt a year earlier; leverage fell to 1.9x, within its 1.5x–2.0x target range.
• Management expects the challenging market backdrop to continue in the second half and is guiding to a trading performance similar to the first half, while continuing to pass through supplier price increases and avoid low-margin or high-credit-risk business.
• Travis Perkins reported progress in its general merchanting operations, including a mid- to high-single-digit profit improvement, while Toolstation UK plans to expand from roughly 590 to 650 locations and has surpassed 900,000 loyalty-club members.
• Residential new-build weakness, rising construction-company insolvencies, and deterioration at CCF remain significant risks; the group is also reviewing Toolstation Benelux, with discussions underway with potential third parties regarding its future ownership.

Travis Perkins Price Performance

LON TPK opened at GBX 679 on Tuesday. The company has a 50-day moving average price of GBX 550.64 and a two-hundred day moving average price of GBX 584.66. Travis Perkins has a 52 week low of GBX 493.40 and a 52 week high of GBX 723.50. The stock has a market cap of £1.44 billion, a price-to-earnings ratio of -8.15, a price-to-earnings-growth ratio of 6.44 and a beta of 1.28. The company has a current ratio of 1.72, a quick ratio of 0.84 and a debt-to-equity ratio of 59.00.

Analyst Upgrades and Downgrades

TPK has been the subject of several research reports. JPMorgan Chase & Co. decreased their target price on Travis Perkins from GBX 680 to GBX 630 and set an "overweight" rating for the company in a research report on Tuesday, May 19th. Berenberg Bank reduced their price target on shares of Travis Perkins from GBX 620 to GBX 580 and set a "hold" rating on the stock in a research report on Wednesday, July 8th. Peel Hunt reaffirmed a "buy" rating and set a GBX 660 price objective on shares of Travis Perkins in a research report on Tuesday. Finally, Jefferies Financial Group cut their target price on shares of Travis Perkins from GBX 507 to GBX 464 and set an "underperform" rating on the stock in a report on Monday, April 20th. Three analysts have rated the stock with a Buy rating, one has assigned a Hold rating and one has issued a Sell rating to the stock. Based on data from MarketBeat, the company presently has an average rating of "Hold" and a consensus price target of GBX 616.80.

About Travis Perkins

Travis Perkins plc engages in distribution of building material products in the United Kingdom. It operates through Merchanting and Toolstation segments. The company offers tools and building supplies. It also distributes pipeline products, as well as supplies managed services, and commercial and industrial heating and cooling solutions. In addition, the company provides in specialist civils and drainage solutions; and air-conditioning and refrigeration products and heat pumps. Further, it provides insulation and interior building products to interior building specialists, contractors, and builders; and kitchens and joinery products.

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