Upgrades all round were the order of the day as shares in carpentry specialist Howden Joinery (HWDN) climb 7.6% to 493.7p. The forecast hikes come after a trading update from the £3.2 billion cap confirms that it remains well positioned to achieve its expectations for the full year, reporting as it did a good sales performance so far in the second half.
Peel Hunt raised its recommendation on the kitchen fit-out expert from 'Hold' to 'Buy' and even if the broker lowered its target price from 565p to 535p, analyst Gavin Jago argues this target still implies upside of around 15%. Howden has reported revenue growth of 12.8% since the first half and this has been supported by healthy trading through October which in trading terms is probably the group’s most important month. Jago maintains that 'Howden remains on track to meet 2015 expectations and our forecasts point to double-digit earnings growth over the next few years.'
But Peel Hunt wasn't the only broker to sweeten their view. According to N+1 Singer, 'performance in H2, including the key October trading period, has been outstanding at +10% LFL particularly once positive gross margins are also factored in.'
Howden's performance is all the more impressive when one compares it with that of peers like Travis Perkins (TPK) which issued an update to the market on 22 October informing investors that full-year EBITA was expected to be at the lower end of market expectations as a consequence of a 'slowdown in secondary housing transactions towards the end of 2014 and early part of 2015'. The knock-on effect of this weaker demand has apparently been to put the brakes on recovery in the Renovation Maintenance Improvement (RMI) market. That notwithstanding, Howden's update suggests that the group is outperforming softness in the wider RMI markets.