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The Expert View: BT, TP ICAP & ITV

Our daily roundup of analyst commentary on shares, including Barratt Developments and IMI.

by Michelle McGagh on May 11, 2018 at 05:01

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Key stats
Market capitalisation£21,585m
No. of shares out9,922m
No. of shares floating8,365m
No. of common shareholdersnot stated
No. of employees106400
Trading volume (10 day avg.)21m
Profit before tax£7,707m
Earnings per share19.09p
Cashflow per share54.83p
Cash per share20.56p

BT: silver linings among dark clouds, says Hargreaves

Shares in BT (BT) fell over 7% on the news of a flat dividend and a restructuring that will see 13,000 jobs cut but Hargreaves Lansdown spied some positives for investors.

Underlying full-year revenue dipped 1% to £23.7 billion with profits of £7.5 billion down 2% and at the bottom end of the telecom company’s guidance. A final dividend of 10.55p brings the total for the year to 15.4p per share, the same as last year. BT said it will hold dividends at this level for the next two years.

Analyst George Salmon said although the job cuts will only go some way to delivering £1.5 billion in cost savings and next year’s profits look likely to fall there were ‘silver linings’ in results.

‘EE and the consumer businesses continue to grow,’ he said. ‘However, these improvements are being more than offset by challenging conditions elsewhere. Openreach terms are getting tougher, and the business-to-business and global divisions are having a torrid time. [Chief executive] Gavin Patterson will have his work cut out if he’s to steady the ship.’

The shares shed 17.6p to close at 221p on Thursday.

Key stats
Market capitalisation£2,498m
No. of shares out563m
No. of shares floating551m
No. of common shareholdersnot stated
No. of employees5128
Trading volume (10 day avg.)2m
Profit before tax£303m
Earnings per share11.20p
Cashflow per share23.46p
Cash per share260.23p

TP Icap benefits from volatile markets, says Numis

Interdealer broker TP Icap (TCAP) has been boosted by the resurgence in stock market turbulence this year, says Numis Securities.

Analyst Marcus Barnard retained his ‘add’ recommendation but reduced his share price target to 565p after the company reported revenues for the four months to the end of April beat forecasts with a 3% rise to £601 million.

Formed two years ago when Tullet Prebon bought the global hybrid voice broking unit from the now NEC Group, TP Icap said it was on target to achieve savings of £100 million from that deal.

‘The figure has been helped by improved conditions in [interest] rates products and an uptick in equity volatility, offset by ongoing weaknesses in power and poor credit markets,’ he said.

‘The rates outlook at volatility are supportive for future volumes. We adjust our 2018 forecasts downwards by 7%, reflecting guidance given for 2018 and reduce our target price by a similar amount.’

Investors were not convinced and the shares slid nearly 7% or 33p to 448p.

Key stats
Market capitalisation£6,357m
No. of shares out4,025m
No. of shares floating3,592m
No. of common shareholdersnot stated
No. of employees6055
Trading volume (10 day avg.)13m
Profit before tax£829m
Earnings per share10.41p
Cashflow per share13.29p
Cash per share3.13p

World Cup could cheer ITV, says Liberum

Concerns about a significant slowdown in advertising at ITV (ITV) are proving to be unwarranted and Liberum expects a turnaround in the commercial broadcaster’s shares.

Analyst Ian Whittaker reiterated his ‘buy’ recommendation and share price target of 265p following a first quarter trading statement showing increased diversification in dividend payments and an advertising increase of 3%, boosted by video on demand advertising revenue.

He said ITV shares had been depressed on expectations that June advertising around the World Cup would be weaker than thought. However, ITV’s latest prediction is that total advertising will rise 17% next month, ahead of the single-digit percentage increases predicted by media buyers.

‘We expect forecasts to remain broadly stable but, after negative expectations around June, the shares may see a turn in sentiment,’ said Whittaker.

ITV shares advanced 4.6p or 3% to 155.7p.

Key stats
Market capitalisation£5,641m
No. of shares out1,013m
No. of shares floating984m
No. of common shareholdersnot stated
No. of employees6193
Trading volume (10 day avg.)3m
Profit before tax£812m
Earnings per share60.69p
Cashflow per share61.11p
Cash per share77.87p

Take profits on Barratt Developments, says Shore Capital

Shore Capital remains cautious on housebuilders and believes investors should take profits on Barratt Developments (BDEV).

Analyst Robin Hardy retained his ‘sell’ recommendation and ‘fair value’ of 520p for the shares, which he said remained at the ‘low end of the sector.

‘With the shares having been briefly below this level earlier in the year, we were considering a switching away from our ‘sell’ recommendation but after the recent rally, we will be sticking with our negative stance,’ he said.

He said recent strength in the sector is ‘ill-placed as it is based on the hope that a deferred decision to raise base rates will stop the rise in mortgage rates’. Hardy is also ‘increasingly concerned about weak house prices and the impact this will have on sector margins’.

Hardy added that housebuilder risk is still being ‘under-priced’ and the sector ‘looks broadly over-bought’.

The shares slipped nearly 10p or 1.7% to 558p.

Key stats
Market capitalisation£2,967m
No. of shares out272m
No. of shares floating270m
No. of common shareholdersnot stated
No. of employees10647
Trading volume (10 day avg.)1m
Profit before tax£287m
Earnings per share51.64p
Cashflow per share75.88p
Cash per share41.33p

‘Buy’ IMI on share price weakness, says Jefferies

Jefferies International has upgraded IMI (IMI) to ‘buy’ from ‘hold’ after recent weakness in the engineering group’s share price.

Analyst Andy Douglas raised his recommendation but lowered his share price target to £13.05 from £13.75, saying the stock ‘continues to divide opinion among investors’.

‘The last few years have not gone to plan for the group, but the recent weakness in the share price throws up an interesting buying opportunity for investors,’ he said.

‘The group is only firing on a few of its cylinders, but it is not broken and the divisions all have appealing intrinsic value.’

IMI shares added 13p or 1.2% to £10.90.

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