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The Expert View: Barclays, Centrica and Anglo American

Our daily roundup of analyst commentary on shares, also including Morgan Sindall and Rathbones.

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Key stats
Market capitalisation£35,774m
No. of shares out17,064m
No. of shares floating17,013m
No. of common shareholdersnot stated
No. of employees119300
Trading volume (10 day avg.)42m
Turnover£14,541m
Profit before tax£8,017m
Earnings per share9.17p
Cashflow per share20.52p
Cash per share867.01p

Barclays can deliver upside, says Shore Capital

Barclays' (BARC) current share price is not factoring in the ability of management to improve returns and deliver upside, says Shore Capital.

Analyst Gary Greenwood retained his ‘buy’ recommendation and a ‘fair value’ price of 240p after full-year 2017 results showed profits ‘a little weaker than consensus but capital ratio and 2018 dividend guidance better than expected’. The shares rose 4.4% to 211p yesterday.

Barclays said it would increase the dividend to 6.5p this year, restoring it to a level last seen in 2015 and better than the 5.2p investors had been expecting.

‘We believe that the current share price is giving management no credit for its ability to improve returns, with delivery providing scope for significant upside potential,’ said Greenwood.

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Key stats
Market capitalisation£7,944m
No. of shares out5,600m
No. of shares floating5,590m
No. of common shareholdersnot stated
No. of employees38278
Trading volume (10 day avg.)22m
Turnover£27,102m
Profit before tax£2,402m
Earnings per share31.19p
Cashflow per share48.18p
Cash per share34.51p

Centrica divi puts strain on balance sheet, says Jefferies

Centrica (CNA) has announced a cost-cutting plan and a maintained dividend but Jefferies said the continuation of the payouts would put strain on its balance sheet.

Analyst Ahmed Farman retained his ‘hold’ recommendation and target price of 140p on the stock after it reported £150 million of cost cuts - including the loss of 4,000 jobs - and plans to dispose of its nuclear business by 2020.

The British Gas owner reaffirmed its 12p dividend, sending its shares 7.2% higher to 141.7p yesterday.

‘In line with our forecasts, Centrica expects to generate adjusted operating cashflow in the £2.1 billion to £2.3 billion range until 2020,’ said Farman.

‘The company’s capital expenditure target has also been raised from £1 billion to £1.2 billion per annum... as we recently highlighted, with operating cashflow above £2 billion, Centrica would be able to maintain its 12p dividend, but its balance sheet would remain somewhat strained.’

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Key stats
Market capitalisation£25,254m
No. of shares out1,405m
No. of shares floating1,039m
No. of common shareholdersnot stated
No. of employees78200
Trading volume (10 day avg.)5m
Turnover15,277m USD
Profit before tax3,830m USD
Earnings per share0.88 USD
Cashflow per share2.23 USD
Cash per share3.08 USD

Turnaround at Anglo isn’t over, says Hargreaves Lansdown

A commodity rally has seen profits at mining giant Anglo American (AAL) soar and productivity and cost gains could add another 50% on top, says Hargreaves Lansdown.

Underlying profits for 2017 grew 48% to $3.3 billion (£2.4 billion) thanks to higher commodity prices, increased production and lower costs.

Analyst Nicholas Hyett said the company has turnaround from the ‘dire straits’ it was two years ago but now profits are ‘soaring’ and net debt of $4.5 billion was ‘even lower than the market had expected’.

‘Of course some of this is money for nothing - resurgent commodity prices have added $2.4bn to cash profits and are totally outside the group’s control,’ he said.

‘Nonetheless management have delivered significant improvements in operating performance, with cost cutting and productivity gains more than offsetting the inflationary headwinds that are buffeting the sector.’

A further $3 billion to $4 billion in cost and productivity gains planned by 2022 were ‘ambitious’ and ‘achieving the upper end of that would add almost 50% to this year’s profits’, said Hyett.

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Key stats
Market capitalisation£563m
No. of shares out45m
No. of shares floating37m
No. of common shareholdersnot stated
No. of employees5982
Trading volume (10 day avg.)m
Turnover£2,562m
Profit before tax£47m
Earnings per share81.42p
Cashflow per share96.68p
Cash per share511.09p

Morgan Sindall ‘materially too cheap’, says Numis

Numis has upgraded ‘cheap’ Morgan Sindall (MGNS) on the back of almost 50% profit growth and faith the construction company can continue the momentum.

Analyst Howard Seymour upgraded his recommendation from ‘add’ to ‘buy’ with a target price of £15.65 after the company delivered 46% profit before tax growth in its full year results. The shares were up 10p at £12.44 yesterday.

‘We think that the strength of the order book and the prospect of further margin growth suggests profits can continue to progress strongly from here,’ he said.

‘With the shares trading on sub 9x price/earnings and the group boasting a net cash balance sheet, we think Morgan Sindall is materially too cheap.’

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Key stats
Market capitalisation£1,397m
No. of shares out51m
No. of shares floating46m
No. of common shareholdersnot stated
No. of employees1123
Trading volume (10 day avg.)m
Turnover£272m
Profit before tax£84m
Earnings per share78.24p
Cashflow per share120.72p
Cash per share2,122.74p

Peel Hunt sees long-term value in Rathbones

Rathbones (RAT) has reported final results ahead of expectations and Peel Hunt says the shares are still attractive despite recovering after the market correction.

Analyst Stuart Duncan retained his ‘add’ recommendation and target price of £28.00 on the shares, which rose 14p to £27.50 yesterday.

‘Despite having increased forecasts in January, the results came in comfortably ahead of these expectations,’ he said. ‘Broadly the reason for the beat was higher operating margins than we had assumed.’

He said looking ahead the group was ‘well positioned’ and that ‘wealth manager remains an attractive area, given the long-term structural drivers’.

‘The shares have recovered after recent volatility and still offer attractive long-term value.’

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