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The Expert View: Barclays, GlaxoSmithKline and WPP

Our daily roundup of analyst commentary on shares, also including Just Group and Foxtons.

by Michelle McGagh on Aug 08, 2017 at 05:00

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Key stats
Market capitalisation£35,808m
No. of shares out17,035m
No. of shares floating16,968m
No. of common shareholdersnot stated
No. of employees119300
Trading volume (10 day avg.)42m
Turnover£14,541m
Profit before tax£1,562m
Earnings per share9.17p
Cashflow per share20.52p
Cash per share867.01p

Barclays will underperform without revenue boost, says Berenberg

Barclays (BARC) has taken steps to focus on fewer, stronger businesses but Berenberg says it must now improve returns or continue to underperform.

Analyst Peter Richardson retained his ‘sell’ recommendation and target price of 200p on the shares, which were flat at 210p yesterday.

‘Having delivered a better capitalised bank focused on a few stronger businesses, Barclays must now improve returns,’ he said.

He said there were ‘structural headwinds’ facing investment bank revenues that would ‘limit incremental returns from expanding this business’.

‘Given this, future conduct costs and headwinds from the credit cycle, we struggle to see meaningful sustainable growth in tangible book value per share. Without this, and trading on 0.75x tangible book value, we believe Barclays will continue to underperform,’ said Richardson.

Key stats
Market capitalisation£75,019m
No. of shares out4,918m
No. of shares floating4,860m
No. of common shareholdersnot stated
No. of employees99827
Trading volume (10 day avg.)10m
Turnover£27,889m
Profit before tax£912m
Earnings per share18.60p
Cashflow per share57.77p
Cash per share101.55p

Deutsche Bank: reinvestment means GSK faces margins fight

Earnings per share growth at GlaxoSmithKline (GSK) will be limited over the next three years, predicts Deutsche Bank, as the pharma giant invests to improve its research and development (R&D) productivity.

Analyst Richard Parkes retained his ‘hold’ recommendation and lowered his target price from £17.20 to £16.10, following a strategic update.

He said that as ‘the company is entering a period of reinvestment as it looks to improve its pharma R&D productivity’ that would ‘likely limit 2017-20 earnings per share growth to low single digits’.

Parkes added that its results were ‘a reminder of the benefits of its diversified structure with weaker consumer trends offset by continued strong vaccines performance’.

‘However, reinvigorating pharma R&D will not be a quick fix and the company will arguably have to work harder to achieve consensus forecasts and defend margins than investors anticipated,’ he said.

The shares fell 7p to £15.26 yesterday.

Key stats
Market capitalisation£20,080m
No. of shares out1,273m
No. of shares floating1,225m
No. of common shareholdersnot stated
No. of employees198000
Trading volume (10 day avg.)4m
Turnover£14,389m
Profit before tax£1,400m
Earnings per share108.00p
Cashflow per share148.87p
Cash per share190.26p

WPP: US departure not a concern for Liberum

Advertising agency WPP (WPP) may have lost its North American chief executive Brian Lesser but Liberum says it is not a reflection of the company and structural concerns are ‘overdone’.

Analyst Ian Whittaker reiterated his ‘buy’ recommendation and target price of £20.00 on the shares, which rose 1.1% to £15.79 yesterday, as it was announced Lesser was leaving to join AT&T as boss of a new business unit. The unit will build an advertising and analytics platform for the data and content assets AT&T will acquire from its pending deal with Time Warner.

‘While there may be some speculation as to why he left, we do not see the move as a sign that WPP is having problems nor that AT&T is about to become an aggressive competitor to the agencies,’ said Whittaker.

‘We see structural concerns as overdone and the latest US chief executive business roundtable survey suggests a pick up for the agencies’ organic revenue growth in the second half of the year, which is positive.’

Key stats
Market capitalisation£1,432m
No. of shares out934m
No. of shares floating892m
No. of common shareholdersnot stated
No. of employees1190
Trading volume (10 day avg.)2m
Turnover£-100,000m
Profit before tax£-100,000m
Earnings per share-9,999,999.00p
Cashflow per share-9,999,999.00p
Cash per share7.65p

Just Group’s Fitch rating boosts shares

Just Group (JUSTJ), formerly known as JRP Group, has received an A+ rating from Fitch, which Numis says should put an end to negative commentary surrounding the retirement specialist.

Analyst Marcus Barnard retained his ‘buy’ recommendation and target price of 220p on the group, which was born out of a merger between Just Retirement and Partnership.

He said the credit rating ‘should mark the end of negative commentary about Just Group’s capital strength’ and allow it to lower finance costs if it seeks to raise further debt.

‘We believe the company is on track to grow profitability by writing high margin new business, while maintaining the capital base and paying dividends to shareholders,’ he said.

‘We expect the dividend to continue to grow at 6%, the surplus capital to remain around or above £700 million, and for the company to continue being selective writing new business.’

The shares rose 4.2% to 152.7p yesterday.

Key stats
Market capitalisation£273m
No. of shares out275m
No. of shares floating248m
No. of common shareholdersnot stated
No. of employees1337
Trading volume (10 day avg.)m
Turnover£133m
Profit before tax£16m
Earnings per share5.70p
Cashflow per share7.53p
Cash per share3.45p

Foxtons at ‘attractive’ level despite London property woes, says UBS

Estate agent Foxtons (FOXT) may have been hit by a faltering London property market but UBS says the shares are now at a ‘risk/reward level’ that looks attractive.

Analyst Heidi Richardson retained her ‘buy’ recommendation but reduced her target price from 145p to 115p on the stock after first-half results.

The results ‘provided further evidence of the ongoing challenges in the London housing market, with commentary suggesting the market weakened further towards the end of June / beginning of July’. However, Richardson said ‘the risk / reward balance at this level looks attractive’.

‘In addition, while the market remains challenging, Foxtons has a secure net cash balance sheet, and a free cashflow yield of c.4% in full year 2018, supported by stable lettings revenues, with strong operational leverage providing significant upside potential when the cycle turns,’ she said.

The shares rose 1% to 99p yesterday.

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  • Barclays PLC (BARC.L)
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  • GlaxoSmithKline PLC (GSK.L)
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  • WPP PLC (WPP.L)
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  • Just Group PLC (JUSTJ.L)
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  • Foxtons Group PLC (FOXT.L)
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