Will Shares In Travis Perkins plc Outperform Tesco PLC, J Sainsbury plc, Next plc And Sports Direct International Plc After Results?

Do Travis Perkins plc’s (LON:TPK) (LSE:TPK.L) shares have more investment appeal than shares in Tesco PLC (LON:TSCO) (LSE:TSCO.L), J Sainsbury plc (LON:SBRY) (LSE:SBRY.L), Next plc (LON:NXT) (LSE:NXT.L) and Sports Direct International Plc (LON:SPD) (LSE:SPD.L)?

Travis Perkins plc
Travis Perkins plc

Shares in Travis Perkins plc (LON:TPK) (LSE:TPK.L) have dropped 6.4% today after the release of results to the stock market. Revenue in 2016 increased 4.6%, with LFL revenue up 2.7% versus 2015. Adjusted operating profit excluding property profits was £3 million higher at £392 million, however adjusted earnings per share were 3% lower at 120.4p.

It was a difficult year for Travis Perkins’s Plumbing & Heating division. This was driven by structural challenges for traditional merchant businesses in the segment. Further investment is required in the business after the network restructuring work of 2014 and 2015. Travis Perkins will explore all routes to enhance returns for the division in the next 6 months.

However, investors in Travis Perkins will be pleased to hear there were strong performances from the other divisions within the company, which together contribute over 90% of adjusted operating profit. The company expects the UK economic outlook to remain mixed. Weaker sterling has caused cost pressures on imported goods, while the expectations for the secondary housing market transactions have weakened.

The company’s investment in improving its balance sheet could aid its outlook and share price performance in my opinion. Net debt was reduced by £69 million to £378 million in 2016 and FCF was £436 million.

Shares in Travis Perkins have fallen 11% in the last 6 months. That’s ahead of the share price performance of Next plc (LON:NXT) (LSE:NXT.L), which is down 30%. But its behind the shares of Tesco PLC (LON:TSCO) (LSE:TSCO.L), J Sainsbury plc (LON:SBRY) (LSE:SBRY.L) and Sports Direct International Plc (LON:SPD) (LSE:SPD.L). Sainsbury’s is up 8%, Tesco’s shares are 9% higher and Sports Direct has fallen 9%.

In my view, Travis Perkins could see further share price falls in the short run. I think the pound may weaken further and the UK housing market may experience a tough year. I’m more optimistic about the prospects for Next and Tesco, while I think Sainsbury’s and Sports Direct may be more appealing investments on valuation grounds.

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