Source: Sharecast
RBC Capital said it likes Grafton for its proven quality, earnings recovery potential and balance sheet firepower, but stated that it move to push out the group's recovery had drived a -1.5%/-10.8%/-11.1% reduction to its FY25-27 adjusted earnings per share estimates and left it in line with consensus for FY25 and 4% below in FY26/27.
The Canadian bank sees recovered adjusted earnings per share at more than 98p, excluding 10-20% accretion potential from its roughly £300m firepower, rising to approximately £475m.
"Assuming a 50-50 split between buybacks and M&A, £475m could drive c.20% adj. EPS accretion by FY27e. On a more conservative approach, maintaining the capital allocation run rate of c.£120m p.a. (average since FY19) implies c.10% accretion to FY27e, incremental to our estimates. Boltons in Iberia appear the most likely candidate, in our view," said RBC, which reiterated its 'outperform' rating on the stock.
RBC added that Grafton trades on 13.1x CY26e price-to-earnings ratio, falling to roughly 10x on recovered adjusted earnings per share, versus its 14x long-term average.
Reporting by Iain Gilbert at Sharecast.com