The FTSE 250-listed building material supplier Travis Perkins PLC’s (GB:TPK) share price fell sharply yesterday after the company reduced its profit forecasts for the full year. This was mainly triggered by the current slowdown in the housing and renovation market in the UK.
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In its Q2 2023 trading update, the company has revised its outlook, stating that it anticipates the adjusted operating profit for 2023 to be between £175 million and £195 million. This is a downward adjustment from the initial guidance of £240 million provided in June, representing a 12% reduction in the forecast.
On Wednesday, the company’s stock went down by as much as 12% and ended the day at a loss of 6.6%. The shares are currently trading at their lowest level in the last three years.
Travis Perkins stands as the leading provider of building materials and equipment to the construction industry in the UK. The company’s brands include Toolstation, BSS, Keyline, CCF, and Travis Perkins.
Performance Impacted by Weak Housing Market
The housing market in the UK has experienced a slowdown this year following an increase in interest rates. This has overall reduced housing activities, hurting the company’s business. Travis Perkins continues to face challenges as a squeeze on disposable income has resulted in homeowners being more cautious about spending on their properties.
This was quite evident in the company’s numbers. For the third quarter, the company’s revenue was down by 1.8%, and like-for-like sales also experienced a 1.8% decrease. In its Merchanting segment, revenues were down by 3.4% due to a decline in market activity and lower pricing. Pricing experienced a decline of 3.1%, mainly due to significant “deflationary pressures on commodity products,” thereby affecting gross profit and margins.
On the plus side, the overall performance was slightly offset by its brand, Toolstation. It posted a revenue growth of 7.3% in Q3, as it maintains robust growth in both the UK and Europe. The pricing for Toolstation also improved by 4.8%.
The company will release its full-year earnings for FY23 on February 27, 2024.
Are Travis Perkins Shares a Good Buy?
According to TipRanks, TPK stock has received a Moderate Buy rating based on five Hold, and two Buy recommendations. The Travis Perkins share price target is 991.71p, which is 32% higher than the current trading level.
