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The Expert View: Morrisons, BT and Just Eat
Our daily roundup of analyst commentary on shares, also including Boohoo and Wincanton.
by Michelle McGagh on Jan 11, 2017 at 05:00
Record Christmas shows Morrisons investment paying off, says Hargreaves
Morrisons (MRW) has recorded its best Christmas in seven years, showing its investment in technology and more competitive pricing has paid off, says Hargreaves Lansdown.
Shares in the supermarket jumped 4% on news that it is now expecting underlying profit before tax for the year to come in at £330 to £340 million, ahead of analyst consensus. The shares were trading up 3.7%, or 8.8p, at 246p at the time of writing.
‘Morrison has taken action on pricing and is now more competitive at the tills, which are ringing more often as the impressive growth in transaction numbers shows,’ said Hargreaves Lansdown analyst George Salmon.
‘With the group enjoying a record week at Morrisons.com, and a new automated ordering system helping to improve efficiency by lowering stock levels while still increasingly availability, it seems to be finally feeling the benefit of technological advances too.’
Salmon said after the positive update from Morrisons ‘all eyes will now be on the sector’s other big players, Tesco and Sainsbury’s, when they report later in the week’.
Bumper Christmas at Boohoo prompts Peel Hunt forecast upgrades
Online clothing retailer Boohoo (BOO) has upgraded forecasts again and Peel Hunt is expecting ‘significant upside’ over coming years.
Analyst John Stevenson retained his ‘buy’ recommendation and increased the target price from 160p to 180p on the stock following strong Christmas sales. The shares were trading up 0.9%, or 1.2p, at 144p at the time of writing.
‘Boohoo has announced group sales growth of 55%, well ahead of market expectations. We upgrade our top-of-the-range profit before tax forecasts by 7.8% to £29.5 million, earnings per share 2p,’ he said.
‘The highlight of [the recent] statement is the strong traction in the US market, with sales up 188% in local currency, driven by effective autumn/winter campaigns and price investment. We see little reason for this step-up in traffic and conversion to lose momentum in the new financial year, suggesting more significant upside to growth expectations for the next two to three years and more upgrades to come.’
BT valuation is ‘undemanding’, says Barclays
A year of underperformance has made the valuation of telecoms giant BT (BT) look ‘undemanding’, according to Barclays.
Analyst Maurice Patrick retained his ‘overweight’ recommendation and target price of 525p on the stock, which was trading flat at 387p at the time of writing.
‘BT underperformed the sector materially in 2016 and its valuation look undemanding with 36% upside to our target price,’ he said.
‘Regulation remains an overhang, and there is clear political desire to increase fibre investment.'
He added that BT would still be able to grow its dividend by 10-15% a year over the next four years with net debt remaining flat ‘despite a £1 billion a year pension repair assumption’.
Just Eat to ‘tread water’ as UK orders slow, says Jefferies
A fourth quarter update from takeaway ordering service Just Eat (JE) may be disappointing for investors, according to Jefferies.
Analyst David Reynolds retained his ‘buy’ recommendation and target price of £10.00 on the stock, which was trading down 5.6%, or 33p, at 549p at the time of writing.
‘In-line Q4 2016 order update from Just Eat, and having delivered five guidance upgrades in the last 20 months, likely to disappoint perhaps and the bears will home in on the deterioration in UK order growth,’ he said.
‘No real knocks to the thesis, just a reality check as the guidance upgrade conveyor belt comes to a stop. Expect to see modest earnings upside to full-year 2016 guide still, the initial full-year 2017 guide set to be somewhat damp – suspect stock treads water for a while.’
Wincanton contract loss doesn’t impact long-term outlook, says Liberum
Wincanton (WIN) may have lost a contract with Tesco but Liberum said this will not have a major impact on the logistics specialist.
Analyst Gerald Khoo retained his ‘buy’ recommendation and target price of 290p on the stock, with the shares trading 2.5%, or 6p, down at 234p at the time of writing.
‘Tesco has announced a major supply chain restructuring that will result in all warehousing operations being taken in-house. This will see contracts ended with outsourced suppliers like Wincanton,’ he said.
‘However, Wincanton only operates one warehouse on behalf of Tesco, so we see a limited financial impact on the group. We estimate that less than 2% of group revenue is at risk. Although disappointing, we see this as part of the usual ebb and flow of contract wins and losses, with no impact on our long-term positive stance.’
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Look up the shares
- WM Morrison Supermarkets PLC (MRW.L)
- Boohoo.Com PLC (BOOH.L)
- Wincanton PLC (WIN.L)
- BT Group PLC (BT.L)
- Just Eat PLC (JE.L)