The Expert View: Weir, Dunelm and Virgin Media

Our daily round-up of analyst recommendations and commentary, featuring Weir, Dunelm, Virgin Media, Reckitt Benckiser and Capita.

Key stats
Market capitalisation	£4,518m
No. of shares out	213m
No. of shares floating	211m
No. of common shareholders	not stated
No. of employees	11669
Trading volume (10 day avg.)	1m
Turnover	£2,292m
Profit before tax	£278m
Earnings per share	130.46p
Cashflow per share	159.09p
Cash per share	53.90p

*Correct as at 12 Feb 2013

Deutsche Bank sees better sales for Weir

Signs that the market for gas fracking pumps is picking up is good news for Weir (WEIR.L), according to Deutsche Bank analyst Peter Reilly, who has increased his target price for the oil industry specialist.

'Our thesis on Weir has been that the market for gas fracking pumps would start to recover sometime in 2013, but the timing was uncertain,' the analyst said.

'Recent newsflow has been mixed, but none of the peers is getting gloomier and some are getting more optimistic. We are raising our target price due to rolling forward the valuation to 2014E.'

Reilly's target price rises to £24 from £21, and he reiterated his 'buy' recommendation.

Shares in the group closed at £21.02 on Tuesday, up 10p or 0.5%.

Key stats
Market capitalisation	£1,587m
No. of shares out	203m
No. of shares floating	90m
No. of common shareholders	not stated
No. of employees	6911
Trading volume (10 day avg.)	0m
Turnover	£604m
Profit before tax	£71m
Earnings per share	35.09p
Cashflow per share	44.29p
Cash per share	32.23p

*Correct as at 12 Feb 2013

Seymour Pierce ups target price for Dunelm

Seymour Pierce analyst Freddie George has upgraded his target price for homewares retailer Dunelm (DNLM.L) following a strong trading update.

The interim results showed pre-tax profits up 14.6% to £59.8 million, marginally beating George's forecast of £59 million, on sales up by 13.4%, including like-for-like growth of 2.2%, to £340.1 million. Gross margins were reported to be up by 30 basis points.

'There is likely to be some profit taking in the stock this morning after the company’s comment on the outlook and following the stock’s strong performance (+17%) in the last quarter. For the time being, we are maintain and reiterate our HOLD recommendation but raise our TP to 740p (from 640p),' the analyst said.

'The company has a clear niche in a category, where competition is fragmented and has, we believe, also a great opportunity to improve gross margins (currently around 50%) by growing own label, direct sourcing and developing a multi-channel platform.'

Shares in the group closed at 788p on Tuesday, down 3.5p or 0.4%.

Key stats
Market capitalisation	na
No. of shares out	na
No. of shares floating	na
No. of common shareholders	na
No. of employees	na
Trading volume (10 day avg.)	na
Turnover	na
Profit before tax	na
Earnings per share	na
Cashflow per share	na
Cash per share	na

*Correct as at 12 Feb 2013

Liberty bell tolls for Virgin Media

Berenberg Bank analyst Stuart Gordon has downgraded Virgin Media (VMED.L) from 'buy' to 'hold' on news that US group Liberty Global is to buy the business.

Liberty Global's bid values Virgin Media at $47 per share, a 38% premium to Gordon's previous price target. The analyst expects the bid to be successful, and he doesn't think a rival bid is likely.

'Vodafone acquired Cable & Wireless Worldwide and we suspect that it will pursue its UK strategy via this asset. The other mobile operators are unlikely bidders; O2 lacks the financial firepower just now, while with Everything Everywhere’s partners looking at potential exits, we doubt it will bid,' he said.

Shares in the group closed at £29.59 on Tuesday, up 53p or 1.8%.

Key stats
Market capitalisation	£31,354m
No. of shares out	720m
No. of shares floating	636m
No. of common shareholders	not stated
No. of employees	37800
Trading volume (10 day avg.)	1m
Turnover	£9,485m
Profit before tax	£1,745m
Earnings per share	237.15p
Cashflow per share	259.71p
Cash per share	80.01p

*Correct as at 12 Feb 2013

Don't overestimate Reckitt Benckiser's flu-season fillip, SocGen warns

The sniffs and snivels resulting from the flu season in the US won't be enough to propel household products maker Reckitt Benckiser (RB.L) in the year ahead, according to Societe General analyst Chas Manso, who has reiterated his 'sell' recommendation.

Consensus estimates ahead of today's full-year results have pencilled in weaker fourth-quarter growth than the 2% bump in Q3, despite the well documented cold/flu snap in the US.

'The cold/flu issue is a low price-to-earnings metric,' Manso said. 'It is prudent to assume the season normalizes next year, and we note Perrigo announced the much delayed generic Mucinex 600mg launch will be in March 2013 and J&J is rebuilding its cold/flu business – so trading conditions could be much less favourable next season.'

Manso reiterated his target price of £35.

Shares in the group closed at £42.62 on Tuesday, up 27p or 0.6%.

Key stats
Market capitalisation	£5,316m
No. of shares out	654m
No. of shares floating	647m
No. of common shareholders	not stated
No. of employees	46500
Trading volume (10 day avg.)	2m
Turnover	£2,930m
Profit before tax	£238m
Earnings per share	39.07p
Cashflow per share	61.75p
Cash per share	12.15p

*Correct as at 12 Feb 2013

Shore Capital reiterates 'hold' on Capita

Shore Capital analyst Robin Speakman has reiterated his 'hold' recommendation on outsourcing giant Capita (CPI.L) ahead of preliminary results due at the end of the month.

'We moved Capita off the SELL list on 27th November at 730p, suspecting that news flow was set to be more positive in respect of contract announcements through to the results date and beyond – at least until we expect the public sector market to tighten again in 2014 as the UK election cycle looms,' Speakman said. 'The stock has clearly performed more strongly since November, with the market.

'On a cash flow basis, the valuation looks full to us at over 800p, we have full valuation at c845p, a 10% discount suggests fair value to us of about 760p. Still, we expect contract newsflow to remain positive, we thus retain a HOLD for the present awaiting renewed forecast guidance.'

Shares in the group closed at 813p on Tuesday, up 3.5p or 0.4%.