FTSE 100 forecast: How will earnings impact the Kingfisher share price?

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Josh Warner
By :  ,  Market Analyst

Key takeaways

  • Kingfisher is larger than it was before the pandemic, but is now facing much tougher conditions
  • Kingfisher set to deliver tepid growth and lower profits as housing market slows down and consumers find themselves with less money to spend on upgrades
  • Should of seen an improvement in Q2 versus Q1 thanks to better weather
  • Analysts are expecting Kingfisher to beat its profit guidance in the first half, but have big doubts over its full year target
  • Cash generation remains strong, underpinning its dividend and buybacks
  • Kingfisher share price has underperformed the UK market this year

 

Kingfisher H1 2023 earnings date and time

Kingfisher will report interim earnings covering the six months to the end of July 2023 on the morning of Tuesday September 19. The results will drop at 0700 BST and a live video webcast will be follow at 0900 BST.

 

Kingfisher earnings consensus

Kingfisher’s first-half revenue is expected to edge up 0.8% from last year to £6.86 billion, according to consensus numbers from Bloomberg. Adjusted pretax profit is seen falling 24% to £358.3 million.

 

Kingfisher earnings preview

The tide has turned for Kingfisher in the last 18 months. Having been a winner during the pandemic as people splashed out on upgrades while stuck at home, conditions have since become much more challenging. Inflationary pressures and higher mortgage costs are leaving consumers with less to spend on their homes, and the spike in demand during lockdown is also unravelling. As a result, Kingfisher is finding it harder to grow and profits are under pressure, even if it still selling more goods and making more profit today than it was before the pandemic.

Conditions have become more challenging for Kingfisher in the last 18 months

(Source: Company reports, with estimates from Bloomberg-compiled consensus. Financial year runs until the end of January)

Revenue growth is expected to be tepid in the first half, driven by its ongoing expansion of Screwfix stores, but like-for-like sales are forecast to fall 3%.  Still, the consensus figures suggest there has been an, albeit very mild, improvement for Kingfisher in the second quarter compared to the first, potentially thanks to better weather conditions that negatively impacted demand early in the year.

Kingfisher makes over 80% of its sales from ‘big ticket’ items that have become more unaffordable for consumers in the current climate, although Kingfisher said it has seen better trading conditions since early April.

It’s largest market in the UK & Ireland is forecast to see same stores sales fall 0.7% in the first half. Screwfix is still growing thanks to its focus on selling tools and supplies to tradespeople, which is countering softer conditions at B&Q that is targeted more toward consumers undertaking DIY. The cost-of-living crisis and rising mortgage rates could continue to have an impact as all of these could prompt customers to push back projects. The slowdown in the housing market, with fewer people on the move and doing up their new residences, could also threaten demand.

In France, same store sales are seen falling 3.6% as both Castorama and Brico Depot suffer from weaker consumer spending and the national strikes over pension reforms.

Sales in the rest of its overseas markets, known as ‘Other International’ and encompassing Poland, Iberia and Romania, will look weak with estimates pointing to a 7.1% drop in same store sales - although this is because it will be coming up against extremely tough comparatives from the year before.

Kingfisher has said it is aiming to report first-half adjusted pretax profits of £350 million, but analysts see scope for a beat with estimates pointing toward £358 million.

However, there are doubts over the remainder of the year. Kingfisher has already warned that annual adjusted pretax profits are expected to plunge to £634 million from the £758 million reported last year. But analysts believe Kingfisher is being too optimistic and see significant risks to that target considering the average estimate among 17 analysts sees profits coming in at just £617.9 million. That suggests markets would welcome a reiteration of its guidance.

Investors are safe in the knowledge that Kingfisher will launch a new share buyback later this year once the existing one is completed, underpinned by its strong cash generation. Kingfisher has said it will deliver at least £500 million of free cashflow over the full year.

 

Where next for the Kingfisher share price?

Kingfisher shares are down 2% since the start of 2023. That makes it among the underperformers within the FTSE 100 this year. That is all the more significant considering the underwhelming performance delivered by UK equities this year, with the index up just 2%.

Starting with the weekly chart, we can see that the stock has tested the falling trendline that has been in play for the last six months but then come up against some resistance at 239p, causing it to fall back to the 50-day moving average. This is now the immediate upside goal.

Notably, buyers have reliably returned to the market whenever the share price has dropped below 224p throughout the whole of 2023. It has dropped to as low as 217p before rebounding, suggesting this is a reliable support zone for the stock. At the same time, the stock has also found support from the rising trendline that can be traced all the way back to the troughs we saw when markets were rocked by the pandemic in March 2020.

Combined, the trendlines are leaving a narrower band for the share price and raising the likelihood of a breakout.

The Kingfisher share price is bouncing between two trendlines

It is a similar picture on the daily chart, which helps reinforce the trendlines and zones identified on the monthly chart. The more granular detail suggests the 100-day moving average has provided some resistance today, having sent the stock back below the 20-day average.

The daily chart of the Kingfisher share price reinforces the patterns on the weekly chart

 

FTSE 100 analysis: Where next?

Kingfisher is a constituent of the FTSE 100, making it the index to watch ahead of the results.

The FTSE 100 has busted through the falling trendline that has held back the index since February and shot above the 200-day moving average in recent sessions. However, we have seen it now come up against some new resistance at around 7,700, which is preventing it from eclipsing the July ceiling. A sustained move above here could allow it to climb to the ceiling that held throughout May at 7,780.

The sharpness of the recent surge has pushed the RSI into overbought territory, which may temper enthusiasm. The hope is that the 200-day moving average can provide some support if it comes under renewed pressure, but it can fall as low as the 50-day moving average at around 7,500 before setting a new lower-low, with the 20-day figure there to provide a potential safety net.

The FTSE 100 has broken above the falling trendline that has dominated in 2023

 

 

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