The Expert View: WH Smith, EasyJet and Fresnillo

Our daily round-up of analyst recommendations and commentary, featuring WH Smith, EasyJet, Fresnillo, Hargreaves Services and Britvic.

Key stats
Market capitalisation	£833m
No. of shares out	129m
No. of shares floating	121m
No. of common shareholders	not stated
No. of employees	16086
Trading volume (10 day avg.)	1m
Turnover	£1,243m
Profit before tax	£84m
Earnings per share	62.69p
Cashflow per share	88.06p
Cash per share	27.69p

*Correct as at 23 Jan 2013

Stick with WH Smith, Seymour Pierce urges

WH Smith (SMWH.L) will continue to defy the doubters long after chief executive Kate Swann has flown the nest, according to Seymour Pierce analyst Kate Calvert.

Calvert praised the group's performance over the Christmas period even though high-street sales in the 20 weeks to 20 January fell 5% year-on-year and travel sales were down 4%. 'Gross margins in both divisions are reported to be up in-line and costs remained tightly managed as usual,' she noted.

The shares have struggled as investors have wrestled with the question of whether Swann's departure in July will mean the end of defiantly strong results amid an uncompromisingly tough outlook for the British high street. The answer is a resounding 'no', according to Calvert.

'We believe there is still plenty of growth to go for, particularly in travel and internationally and we expect to hear more at the half-year results,' she said.

'We believe Steve Clark, who is taking over as CEO having joined WH Smith in 2004 and run the high street division since 2008, is a 'safe pair of hands' and he has been very much involved in the strategic direction of the business. We reiterate our BUY recommendation and 750p price target.'

Shares in the group closed at 650p on Wednesday, down 1.6p or 0.3%.

Key stats
Market capitalisation	£3,389m
No. of shares out	396m
No. of shares floating	223m
No. of common shareholders	not stated
No. of employees	8446
Trading volume (10 day avg.)	2m
Turnover	£3,854m
Profit before tax	£255m
Earnings per share	67.36p
Cashflow per share	95.09p
Cash per share	222.98p

*Correct as at 23 Jan 2013

Morgan Stanley lifts EasyJet's target price

Even after a bumper year for shares in EasyJet (EZJ.L) Morgan Stanley analyst Penelope Butcher still thinks there's more to come for the budget airline, and she's increased her target price 18% ahead of today's first-quarter results.

The analyst expects a decline in inter-Europe passenger flight capacity to benefit the low-cost carriers. She expects 2013 pre-tax profits to come in at £402 million, some 13% ahead of consensus exectations.

'Our earnings move upward due to increasing our FY13 passenger growth by 50 basis points to 4% on the basis of stronger than expected year to date passenger traffic,' she said. 'This drives 3% increase in our earnings per share forecast and 7% of the price target upgrade from our prior 850p target to new 1,000p target.'

Shares in the group closed at 855p on Wednesday, down 1.6p or 0.2%.

Key stats
Market capitalisation	£12,177m
No. of shares out	717m
No. of shares floating	164m
No. of common shareholders	not stated
No. of employees	3525
Trading volume (10 day avg.)	1m
Turnover	1,385m USD
Profit before tax	569m USD
Earnings per share	0.79 USD
Cashflow per share	1.07 USD
Cash per share	0.60 USD

*Correct as at 23 Jan 2013

UBS target price for Fresnillo falls on lower gold production

Gold production that came in below expectations has spurred UBS analyst Chris Lichtenheldt to trim his target price for Fresnillo (FRES.L), but his long-term outlook remains positive, so he's sticking with a 'neutral' recommendation.

Fourth-quarter gold production of 97,000 ounces was down 23% on last year and significantly lower than Lichtenheldt had pencilled in. Full-year production of the yellow metal still bear the company's original guidance of 460,000 ounces, but Lichtenheldt said this figure was too conservative.

The analyst noted that construction of the leaching plant at Herradura in Mexico remains on track for completion in the third quarter, which could ultimately increase annual gold production by something like 50,000 ounces.

Lichtenheldt's target price falls from £21 to £20.

Shares in the group closed at £16.95 on Wednesday, down 30p or 1.7%.

Key stats
Market capitalisation	£188m
No. of shares out	27m
No. of shares floating	23m
No. of common shareholders	not stated
No. of employees	2627
Trading volume (10 day avg.)	0m
Turnover	£688m
Profit before tax	£29m
Earnings per share	106.13p
Cashflow per share	200.88p
Cash per share	169.28p

*Correct as at 23 Jan 2013

Now's the time to buy battered Hargreaves Services, Westhouse says

Westhouse analyst Michael Donnelly has upgraded coal miner Hargreaves Services (HASE.L) from 'add' to 'buy' after a 40% slump in the value of the shares over the past year.

Geological problems eventually saw its Maltby mine in Yorkshire closed, and it was also hit by a fraud in its Belgian business. Donnelly estimates that combined these two equate to a £40 million cash write-off.

Nonetheless, he said the sell-off was overdone. 'We restate our fundamentally unchanged investment case, but also note that £140 million of enterprise value has been removed from HSP’s value in 2012, but we can only account for £63 million of value forgone (Maltby and Belgium).

'The shares trade at a significant (40%+) discount to our conservative sum-of-the-parts valuation and on a 5.1x CY2013E price to earnings ratio, represent an attractive value play, supported by an above-average 3.4% yield. We raise our recommendation from add to buy.'

Shares in the group closed at 670.5p on Wednesday, down 0.5p or 0.1%.

Key stats
Market capitalisation	£1,034m
No. of shares out	242m
No. of shares floating	226m
No. of common shareholders	not stated
No. of employees	3337
Trading volume (10 day avg.)	0m
Turnover	£1,256m
Profit before tax	£57m
Earnings per share	22.37p
Cashflow per share	39.48p
Cash per share	20.49p

*Correct as at 23 Jan 2013

Shore Capital backs Britvic with 'buy' recommendation

Soft drinks maker Britvic (BVIC.L) has made a good start this year, according to Shore Capital analyst Phil Carroll, and he's reiterated his 'buy' recommendation.

In the quarter to 23 December group revenues rose 4.8% in constant currency terms. Sales in the UK rose 5.4%, beating Nielsen's estimated 1.3% rise in the value of the market as a whole. Sales of fizzy drinks rose 9.2% while still drinks declined 0.7%, which was partly due to problems with the lids on its Fruit Shoot range, which led to a product recall last year.

'Overall, a good start to the year and despite Q2 showing some slowdown, Q1 is ahead of our expectations. We continue to be positive on the merger with AG Barr (BAG, Buy at 510p) and therefore, we also retain our buy recommendation on Britvic,' he concluded.

Shares in the group closed at 430p on Wednesday, up 1.8p or 0.4%.