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The Expert View: BT, Lloyds & Antofagasta

Our roundup of analyst commentary on shares, including Reckitt Benckiser and Travis Perkins.

by Michelle McGagh on Oct 26, 2017 at 05:01

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Key stats
Market capitalisation£26,101m
No. of shares out9,918m
No. of shares floating8,353m
No. of common shareholdersnot stated
No. of employees106400
Trading volume (10 day avg.)18m
Profit before tax£7,707m
Earnings per share19.09p
Cashflow per share54.83p
Cash per share20.56p

BT could cut dividend, says Jefferies

Telecoms giant BT (BT) ‘promises value’ but Jefferies does not believe the second quarter results will reflect that and shareholders may even face a dividend cut.

Analyst Jerry Dellis retained his ‘hold’ recommendation and reduced the target price from 280p to 265p on the stock, which shed 7.5p to close 2.75% down at 265p.

He said there were ‘weak prospects for a return to free cashflow growth’.

‘BT promises value,’ he said. ‘But we expect Q2 results to showcase the weak operating momentum that leads us to keep forecasts materially below consensus.

‘BT’s incoming chairman faces the clear priority of repairing relations with Ofcom. This will require a very visible demonstration of network investment ranking above shareholders. We believe that a dividend cut cannot be ruled out.’

Key stats
Market capitalisation£48,272m
No. of shares out72,037m
No. of shares floating71,739m
No. of common shareholdersnot stated
No. of employees70255
Trading volume (10 day avg.)177m
Profit before tax£11,821m
Earnings per share2.91p
Cashflow per share6.74p
Cash per share103.78p

Lloyds shares held back by Brexit, says Hargreaves Lansdown

Hargreaves Lansdown believes Lloyds (LLOY) is pointing in the right direction but the bank’s share price is being hindered by Brexit fears.

The bank reported £4.5 billion of profit before tax in the year to end of September, 38% higher than the same period last year. Banking net interest margin increased to 2.85% and will increase further if interest rates start to rise.

Analyst Laith Khalaf said ‘all the dials are pointing in the right direction at Lloyds, but the share price is still being held back by a consensus of angst over Brexit’.

‘The bank is heavily plugged into the domestic economy, and so could sustain collateral damage if Brexit negotiations prompt a slump in UK growth,’ he said.

‘The risk is affecting sentiment towards many domestic cyclical stocks, and while it is a legitimate concern, there is considerable upside if things turn out for the better. In the meantime there is a 5.8% yield on Lloyds’ shares, while provide substantial compensation to shareholders for their forbearance.’

After an early dip yesterday the shares recovered to close unchanged at 67.5p.

Key stats
Market capitalisation£9,846m
No. of shares out986m
No. of shares floating336m
No. of common shareholdersnot stated
No. of employees5427
Trading volume (10 day avg.)3m
Turnover2,757m USD
Profit before tax1,159m USD
Earnings per share0.09 USD
Cashflow per share0.58 USD
Cash per share1.58 USD

Antofagasta guidance disappoints Berenberg

Chilean copper miner Antofagasta (ANTO) may benefit from reduced costs but weaker production forecasts for 2018 are disappointing, says Berenberg.

Analyst Fawzi Hanano retained his ‘sell’ recommendation and target price of 760p on the stock after a third quarter (Q3) update.

Q3 production was in line with expectations, and up quarter-on-quarter, and cash costs were down, but Hanano said the market was sure to concentrate on production guidance for next year.

‘Antofagasta provided copper production guidance for 2018 for the first time,’ he said. ‘While [the guidance] implies some growth year-on-year, it is underwhelming compared to [Berenberg estimates]. We expect the market to focus on the disappointing 2018 guidance, leading to underperformance.’

The shares retreated 45p or 4.4% to 986p.

Key stats
Market capitalisation£45,883m
No. of shares out704m
No. of shares floating649m
No. of common shareholdersnot stated
No. of employees34700
Trading volume (10 day avg.)2m
Profit before tax£3,025m
Earnings per share256.48p
Cashflow per share288.81p
Cash per share109.27p

Liberum: Reckitt Benckiser will recover slowly

Consumer goods group Reckitt Benckiser (RB) has felt the hangover from a cyber-attack and a market slowdown in the third quarter (Q3) but Liberum says the valuation remains attractive.

Analyst Robert Waldschmidt retained his ‘buy’ recommendation but lowered the target price from £87 to £80 on the stock, which softened 0.6% to close 41p lower at £65.58 on Wednesday.

‘Q3 proved challenging as the lingering effects of the cyber-attack and an end-market slowdown continue to weigh on growth,’ he said.

However, Waldschmidt expects a ‘slow like-for-like acceleration’ in growth next year as newly acquired Mead Johnson sales recover.

‘Profitability and cashflow generation remain intact and valuation is attractive,’ he said.

Key stats
Market capitalisation£3,839m
No. of shares out251m
No. of shares floating232m
No. of common shareholdersnot stated
No. of employees24656
Trading volume (10 day avg.)2m
Profit before tax£498m
Earnings per share5.02p
Cashflow per share53.65p
Cash per share99.88p

Shore Capital: Travis Perkins under pressure

A slower roll out of new sites and softening consumer demand have led Shore Capital to reduce its forecasts for builders’ merchants Travis Perkins (TPK).

Analyst Graeme Kyle retained his ‘hold’ recommendation but reduced the target price from £17 to £15.68 on the stock after the third quarter trading statement on Wednesday. The shares edged 5.6p lower to £15.09.

He cut group earnings (before interest, tax and amortisation) forecasts by 9.4% for full year 2017, 17.9% for full 2018, and 18% for 2019.

‘The main change in the current year is at Wickes where we now expect margins to come under pressure from the softening consumer demand for DIY products,’ he said.

‘The main change for 2018 and 2019 is on the revenue line where we now expect a much slower site rollout, as advised by management.’

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  • Lloyds Banking Group PLC (LLOY.L)
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  • BT Group PLC (BT.L)
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  • Reckitt Benckiser Group PLC (RB.L)
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  • Travis Perkins PLC (TPK.L)
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  • Antofagasta PLC (ANTO.L)
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