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The Expert View: Barclays, Anglo American and InterContinental
Our daily roundup of analyst commentary on shares, also including Reckitt Benckiser and Ashmore.
by Michelle McGagh on Feb 17, 2016 at 05:00
Pain at Barclays but there will be gain
Analysts are expecting Barclays (BARC) to lose money in the fourth quarter but cost initiatives still make it a ‘buy’.
Investec analyst Ian Gordon reiterated his ‘buy’ recommendation but reduced the target price from 260p to 245p. The shares were broadly flat at 160.6p yesterday.
‘Barclays always loses money in the fourth quarter of any year, and we expect Q4 2015 to be bad enough to wipe out virtually all reported earnings from Q1 to Q3 2015, hence an uncovered dividend for a fourth successive year. Be that as it may, ahead of – we hope – a raft of cost initiatives on 1 March, on 0.5x 2017 estimated total net asset value, we reaffirm our “buy”.’
Anglo American reports ‘dire’ full year results
Falling commodity prices have reduced Anglo American (AAL) revenues and produced ‘dire’ full-year results at the miner.
Shore Capital analyst Yuen Low did not place a rating or a target price on the stock following the full-year 2015 results. The shares rose 1.2% to 397.8p yesterday.
‘Anglo American’s full year 2015 financials were dire, albeit ever so slightly ahead of both our expectations and that of consensus,’ he said.
‘Falling commodity prices meant that revenues were markedly down at $20.5 billion (2014: $27.1 billion). Despite various cost-savings initiatives and asset disposals, net debt was flat on 2014’s $12.9 billion and indeed, up on July 2015’s $11.9 billion.
‘Anglo American also put more flesh on the portfolio restructuring plan originally outlined in December 2015.
There wasn’t as much detail as we would have liked, and we would have preferred to see announcements of actual disposals rather than more disposal plans.’
Ashmore well positioned when sentiment returns
Emerging markets investment company Ashmore (ASHM) is well positioned for when confidence in markets returns but risks remain.
Peel Hunt analyst Stuart Duncan retained his ‘buy’ recommendation but reduced the target price from 330p to 270p. The shares fell 1.4% to 210.4p yesterday.
‘We reduce our forecasts and target price to reflect the ongoing challenges from emerging market exposure,’ he said.
‘The asset class potentially offers attractive returns but investors remain unconvinced. When sentiment returns, Ashmore is well positioned. The yield remains short-term compensation, although this is not without risk given the reduced earnings expectations.’
InterContinental: special divi won’t boost shares
InterContinental Hotels (IHG) is expected to announce a special dividend but it won’t be a ‘catalyst’ for share price rises.
Numis analyst Wyn Ellis retained his ‘hold’ recommendation and reduced that target price from £26.00 to £25.00. The shares inched 5p higher to £23.04 yesterday.
‘While we expect InterContinental Hotels to announce a special dividend of c.$1 billion we do not expect the prelims to act as a catalyst for the shares,’ he said.
‘We forecast full year 2015 earnings before interest and tax of $670 million and earnings per share of $1.67 – consensus $672 million and $1.70. The shares have marginally underperformed the UK market over the last quarter but, given concerns about global economic growth and the cyclical nature of the hotel sector, we are cutting our price target from £26.00 to £25.00.’
Reckitt Benckiser carries momentum in 2016
Momentum has already built up for household goods giant Reckitt Benckiser (RB) this year.
Liberum analyst Robert Waldschmidt reiterated his ‘buy’ recommendation and increased the target price from £69.00 to £72.50. The shares edged 39p higher to £64.10 yesterday.
‘Reiterate “buy” and lift target price to £72.50 reflecting 5% earnings per share upgrades to 2016-18,’ he said.
‘Reckitt Benckiser carries strong momentum into 2016 underpinned by strong growth in health and emerging markets boosted by a bigger and stronger innovation pipeline. In 2016, we forecast 4.8% organic sales growth and 0.64% earnings before interest and tax margin uplift. Strong free cashflow generation provides ample scope for shareholder returns and sufficient firepower for mergers and acquisitions.
‘We now pencil in a £1 billion ongoing share buyback post 2016 reflecting Reckitt Benckiser’s desire to maintain net debt at approximately £1.6 billion.’
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Look up the shares
- InterContinental Hotels Group PLC (IHG.L)
- Anglo American PLC (AAL.L)
- Barclays PLC (BARC.L)
- Ashmore Group PLC (ASHM.L)
- Reckitt Benckiser Group PLC (RB.L)