Stock of the week: Wolseley
Wolseley recently reported in March an increase in revenue to £8.46bn and a 25% rise in trading profit to £515m. There was further good news for shareholders as the firm announced its dividend will be significantly increased thanks to its improving cash position. Encouragingly, management expects to make further progress in the second half.
Wolseley’s largest operations are in the US where around 70% of its revenues and over three-quarters of its trading profits are generated. Investors should appreciate that the commercial and residential markets in the US have held up well, and the firm has potential to increase its market share in the country. Investors should also note that the group announced that its Nordic operation will be sold and that it will rebrand by changing its name to Ferguson.
We remain positive on the stock, which is up around 30% over the last year and we would recommend Wolseley as a ‘buy’ to investors willing to accept a medium level of risk. We would suggest that investors drip feed into the shares and that they remain focussed on the US economy, as a result of the firm’s exposure to the region.