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The Expert View: Balfour, Whitbread and Countrywide

Our daily roundup of analyst commentary on shares, also including NewRiver Reit and Experian.

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Key stats
Market capitalisation£2,042m
No. of shares out690m
No. of shares floating688m
No. of common shareholdersnot stated
No. of employees21829
Trading volume (10 day avg.)3m
Turnover£6,923m
Profit before tax£130m
Earnings per share0.29p
Cashflow per share7.75p
Cash per share111.45p

Numis upgrades Balfour Beatty on tax boost

Numis has upgraded construction company Balfour Beatty (BALF) as it benefits both directly and indirectly from tax cuts in the US, says Numis.

Analyst Howard Seymour upgraded his recommendation from ‘add’ to ‘buy’ with a target price of 350p on the shares, which rose 1.6% to 295.7p yesterday.

The changes to US tax add c.1p per share and 4% to earnings per share.

‘Aside from these direct benefits, the indirect benefits of increased business confidence and likely investment in the US resulting from these tax moves are good news given the scale of Balfour’s US operations nationwide,’ said Seymour.

‘US exposure being a major part of the group’s operational base plus a UK business where operational improvements will take place alongside the strongest balance sheet in the sector are important investment features in the post-Carillion world and back up our positive investment case.’

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Key stats
Market capitalisation£7,344m
No. of shares out183m
No. of shares floating180m
No. of common shareholdersnot stated
No. of employees42044
Trading volume (10 day avg.)1m
Turnover£3,106m
Profit before tax£806m
Earnings per share230.89p
Cashflow per share348.30p
Cash per share34.37p

Hargreaves Lansdown: Whitbread growth trajectory wanes

Weak consumer confidence has dented the trajectory at Costa Coffee and Premier Inn owner Whitbread (WTB) and investors will be further intrigued to see what activist investor group Sachem Head has planned, says Hargreaves Lansdown.

Its latest trading update showed sales rose 5.6% in the third quarter. But this was driven by new outlets, with like-for-like sales at Costa Coffee growing just 0.5% and stalled growth at Premier Inn after a 5.6% drop in sales in London.

Analyst Laith Khalaf said weak consumer confidence in the UK had ‘lessened Whitbread’s growth trajectory, so investors will be pleased to see a step up in Premier Inn’s expansion into Germany, and Costa’s further investment into the potentially lucrative Chinese market’.

Reports yesterday that Sachem Head was pushing for a break-up of the business sent the shares 3.5% higher to £39.88.

Khalaf said the response ‘suggests the market quite likes the idea of a bit of a change’.

‘After all, there’s not a great deal of common ground between hotels and coffee shops,’ he added.

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Key stats
Market capitalisation£266m
No. of shares out238m
No. of shares floating232m
No. of common shareholdersnot stated
No. of employees10909
Trading volume (10 day avg.)m
Turnover£737m
Profit before tax£116m
Earnings per share8.03p
Cashflow per share23.26p
Cash per share20.95p

No Countrywide divis until 2019, predicts Jefferies

Estate agent Countrywide (CWD) is at the start of a turnaround plan after a tough 2017 and Jefferies says dividends are unlikely to reappear until 2019.

Analyst Anthony Codling retained his ‘hold’ recommendation and reduced his target price from 145p to 125p on the stock after an update revealed markets that were ‘more challenging in 2017 than Countrywide originally anticipated’.

The shares slumped 18.6% to 110p yesterday.

‘The group made some significant changes to the leadership team last year as it sought to address underperformance. Such decisions are never easy to make, but once issues are identified we believe it is better to take assertive action than to wait and hope for a change in market conditions,’ he said.

Codling reduced his estimates for the group and said that ‘we now also assume that dividends will not be reinstated until full year 2019’.

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Key stats
Market capitalisation£960m
No. of shares out303m
No. of shares floating295m
No. of common shareholdersnot stated
No. of employeesnot stated
Trading volume (10 day avg.)1m
Turnover£96m
Profit before tax£64m
Earnings per share15.25p
Cashflow per share15.29p
Cash per share19.50p

NewRiver bounces back from share price wobble, says Liberum

NewRiver Reit (NRRT) has seen high footfall in its properties despite wider concerns about the retail market, supporting a ‘positive outlook’ for the real estate investment trust (Reit), says Liberum.

Analyst David Brockton retained his ‘buy’ recommendation and target price of 370p on the shares after a third quarter update that ‘confirms robust trading and should provide notable reassurance given the recent share price weakness’. The shares jumped 6% to 317.5p yesterday on the news.

‘Despite wider concerns over the retail market, NewRiver’s collections remain high and footfall stable,’ he said. ‘We believe the group’s active asset management and convenience-led focus continues to support its resilient trading.’

He added that affordable rents, asset management initiatives, scale benefits, and growing development opportunities ‘all support a continued positive outlook’.

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Key stats
Market capitalisation£15,094m
No. of shares out920m
No. of shares floating914m
No. of common shareholdersnot stated
No. of employees16000
Trading volume (10 day avg.)2m
Turnover3,143m USD
Profit before tax1,195m USD
Earnings per share0.62 USD
Cashflow per share0.97 USD
Cash per share0.06 USD

‘Buy’ Experian after ‘robust’ update

Data services specialist Experian (EXPN) has reported ‘robust’ trading update and it remains well placed for the long term, according to Shore Capital.

Analyst Robin Speakman retained his ‘buy’ recommendation on the shares after a third quarter update showed organic revenue growth up 5%, while guidance for the full-year remained at for mid-single digit growth with stable margins.

Speakman said the core credit business performed as expected but there was volatility in North America.

‘All in all a solid performance, in our view,’ he said. ‘We retain our view that Experian remains strategically placed in data services for long term growth.’

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Profile: Kevin Doran's formula for success at AJ Bell

Profile: Kevin Doran's formula for success at AJ Bell

From a degree in theoretical physics to teaching and becoming one of the youngest chief investment officers in the UK, Kevin Doran has certainly had an interesting career.

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