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The Expert View: Provident Financial, BP & Marks and Spencer

A daily roundup of analyst commentary on shares, including Whitbread and McColl’s.

by Michelle McGagh on Jul 04, 2017 at 05:01

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Key stats
Market capitalisation£3,509m
No. of shares out148m
No. of shares floating144m
No. of common shareholdersnot stated
No. of employees3261
Trading volume (10 day avg.)1m
Profit before tax£263m
Earnings per share179.95p
Cashflow per share197.54p
Cash per share151.38p

Liberum expects more Provident pain

Liberum Capital expects another profit warning from Provident Financial (PFG) as the consumer credit company struggles with customer attrition and rising arrears.

Analyst Portia Patel reiterated her ‘sell’ recommendation and reduced the target price from £27.70 to £20 on the stock, which slipped 3%, or 72p, to £23.61 yesterday.

Shares in Provident Financial plunged last month after a profits warning triggered by an overhaul of the home credit business.

‘We think another profit warning for home credit is likely, since guidance remains too optimistic,’ said Patel.

‘The disruption to date validates our previously held concerns about rising impairments and customer attrition. We see risk to impairments in Vanquis [credit card] and Moneybarn [car finance] and highlight pressures on the consumer, regulatory intrusion and the risk to 2018 dividend per share.’

Key stats
Market capitalisation£89,365m
No. of shares out19,750m
No. of shares floating19,592m
No. of common shareholdersnot stated
No. of employees74500
Trading volume (10 day avg.)28m
Turnover140,504m USD
Profit before tax88m USD
Earnings per share0.00 USD
Cashflow per share0.60 USD
Cash per share0.93 USD

BP shares undervalue downstream growth, says Barclays

Progress in the downstream business means BP (BP) is a differentiated investment that is ‘meaningfully undervalued’ with a 7% yield, says Barclays.

Analyst Lydia Rainforth retained her ‘overweight’ recommendation and increased the target price from 625p to 675p on the stock, which at the time of writing yesterday traded nearly 2%, or 8.75p, higher at 451.5p.

She said it was becoming ‘increasingly evident’ that the oil giant’s downstream business, which covers refining and distribution, could grow both earnings and cash-flow and was ‘far from the low-growth stable business we had previously assumed’.

‘The growth is set to come from a differentiated offering in both retail and lubricants combined with improved efficiency, although we remain cautious on the prospects for the refining business,’ she said.

‘We believe that BP have undergone significant change in the past five years and we expect to see this finally translating to a differentiated operational and financial performance over the coming five years.’

Key stats
Market capitalisation£5,477m
No. of shares out1,625m
No. of shares floating1,596m
No. of common shareholdersnot stated
No. of employees85209
Trading volume (10 day avg.)7m
Profit before tax£117m
Earnings per share7.18p
Cashflow per share42.54p
Cash per share29.73p

Jefferies backs M&S turnaround plan

Marks & Spencer (MKS) may have reported falling profits last week but Jefferies is backing the high street stalwart after being reassured by its five-year turnaround plan.

Analyst Caroline Gulliver retained her ‘buy’ recommendation and target price of 420p on the stock after spending two days with M&S management at their post-results roadshow.

She said she came away ‘reassured that the five-year turnaround strategy is on track and that despite some challenging markets M&S has plenty of options to improve and grow the business in the medium term’.

Gulliver said the company could ‘win market share in both clothing and food’ despite the weakening consumer backdrop as ‘chief executive Steve Rowe believes M&S is on track to becoming a more capital efficient, market-share winning business’.

At the time of writing on Monday, the shares traded 1.2%, or 4p, higher at 337.5p.

Key stats
Market capitalisation£7,196m
No. of shares out183m
No. of shares floating180m
No. of common shareholdersnot stated
No. of employees42044
Trading volume (10 day avg.)1m
Profit before tax£422m
Earnings per share230.89p
Cashflow per share348.30p
Cash per share34.37p

Numis: Whitbread is roasting!

A Numis Securities visit to the new coffee production hub at Whitbread (WTB) shows the company is prepared for ‘many years of structural growth’.

Analyst Tim Barrett retained his ‘hold’ recommendation and target price of £41 on the stock after a visit to the new Costa facility in Basildon which increases capacity and has room for expansion.

‘Given Costa’s highly successful roll-out over the last decade, roasting requirements had increased eleven-fold,’ said Barrett.

‘Costa is clearly positioning itself for many years of structural growth: a 13% increase to 2,500 UK sites by 2020 and a ‘line of sight’ to more than 3,000 sites, as well as a doubling up of Costa Express machines.’

Barrett added that although he rated Whitbread’s growth prospects highly he had concerns about ‘the cost environment’ which makes the recommendation a ‘hold’.

At the time of writing on Monday the shares were trading 0.6%, or 25p, lower at £39.43.

Key stats
Market capitalisation£232m
No. of shares out115m
No. of shares floating88m
No. of common shareholdersnot stated
No. of employees19319
Trading volume (10 day avg.)m
Profit before tax£14m
Earnings per share12.83p
Cashflow per share26.01p
Cash per share3.26p

Peel Hunt: McColl’s could attract more retailers after Co-op

McColl’s (MCLS) trial link up with Co-op is having a positive impact and Peel Hunt hasn’t ruled out the prospect of another major retailer linking up with the convenience store brand.

Analyst Jonathan Pritchard retained his ‘buy’ recommendation and target price of 300p on the stock, which firmed a penny, or 0.5%, to 201p on Monday afternoon.

‘We visited one of the five McColl’s stores in which the Co-op product trial is taking place. It represents a very different experience to the average McColl’s, with far more own-label lines,’ he said.

‘Shopper feedback has been positive so far and, while we must remember that this is only a trial, we are encouraged by the positive impact this could have on sales densities. Taking a step back, it is another example of a retailer happy to work with McColl’s, and we would not rule out a much closer tie-in with a major retailer over time.’

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Look up the shares

  • Provident Financial PLC (PFG.L)
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  • BP PLC (BP.L)
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  • Marks and Spencer Group PLC (MKS.L)
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  • Whitbread PLC (WTB.L)
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  • McColl's Retail Group PLC (MCLSM.L)
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