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The Expert View: Barclays, Next and Burberry

Our daily round-up of analyst recommendations and commentary, featuring AMEC and Next Fifteen Communications.

Our daily round-up of analyst recommendations and commentary, featuring Barclays, Next, Burberry, AMEC and Next Fifteen Communications.

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Key stats
Market capitalisation£28,077m
No. of shares out12,236m
No. of shares floating11,253m
No. of common shareholdersnot stated
No. of employees139000
Trading volume (10 day avg.)42m
Turnover£20,589m
Profit before tax£3,007m
Earnings per share24.01p
Cashflow per share40.26p
Cash per share876.25p

*Correct as at 31 Oct 2012

Investec eyes Barclays buying opportunity

Ian Gordon, analyst at Investec, has reiterated his 'buy' recommendation on Barclays (BARC.L), saying it remains a safe bet in spite of a trading update that bore the scars of a hefty fee for payment protection insurance (PPI) mis-selling.

The shares plunged 4.3% yesterday morning as the bank announced that profits are down 23% year-on-year to £1.73 billion as a result of a £700 million charge for mis- selling PPI.

It also revealed it faces two investigations from the US Department of Justice over a possible breach of the US Foreign Corrupt Practices Act and power trading in the western US.

Gordon anticipated today's dip, but he said the shares continue to look cheap at 0.6x tangible net asset value, and he noted that they've taken on 59% over the past three months.

'Despite strong recent share price outperformance, Barclays remains notably cheap in relative (and absolute) terms, and we expect weakness today to afford a fresh buying opportunity,' he said.

Shares in the group closed at 227.58p on Wednesday, down 11.22p or 4.7%.

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Key stats
Market capitalisation£5,885m
No. of shares out164m
No. of shares floating154m
No. of common shareholdersnot stated
No. of employees28685
Trading volume (10 day avg.)0m
Turnover£3,441m
Profit before tax£434m
Earnings per share251.48p
Cashflow per share320.73p
Cash per share40.83p

*Correct as at 31 Oct 2012

Seymour Pierce lifts target price for Next

Kate Calvert, analyst at Seymour Pierce, has increased her target price for high- street retailer Next (NXT.L) following a third-quarter update that narrowed its full-year sales guidance towards the top end of the previous range.

The shares dropped about 7% last month after the group warned of disappointing sales over the past two months, but this latest update was more encouraging.

Sales of branded goods were up 2.7% over the quarter, with online sales up 5.6% and retail sales up 1.1%. Calvert noted that the figures benefited from weak comparables and some better weather recently.

Despite the company stating that trading remains volatile it now expects full-year sales growth of 3-4.5%, up from its previous guidance of 2-4.5%.

'While the share price performance is slightly behind the sector over the last one and three months, it has outperformed the All Share year to date by 20% driven mainly by a re-rating,' Calvert said. 'We believe the shares will consolidate around this level given the greater than expected slowdown in Directory and so maintain our hold recommendation.'

Shares in the group closed at £35.67 on Wednesday, down 38p or 1.05%.

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Key stats
Market capitalisation£5,223m
No. of shares out442m
No. of shares floating436m
No. of common shareholdersnot stated
No. of employees7991
Trading volume (10 day avg.)2m
Turnover£1,857m
Profit before tax£264m
Earnings per share59.33p
Cashflow per share79.43p
Cash per share124.65p

*Correct as at 31 Oct 2012

JP Morgan trims target price for Burberry

Melanie Flouquet, analyst at JP Morgan, has cut her target price for high-end fashion retailer Burberry (BBY.L) ahead of a first-half trading update next week that will seek to reassure investors following September's profits warning.

Burberry has already issued guidance on sales over the six-month period (£883 million, up 8% on an underlying basis), so the focus will be on trading conditions over the past few weeks. The shares crashed about 30% after the warning following weaker sales, although they've since clawed back about half of the lost ground.

Flouquet's target price has fallen from £14.60 to £12.70, based on concerns that medium-term margins are likely to come under pressure, and she retains a 'neutral' stance on the shares. The analyst's 2014 sales forecast declines 4.5% following September's profits warning, although her pre-tax profit forecast is down just 1% as a result of expected costs savings across the group.

Burberry shares feature in Citywire AA-rated Alister Hibbert's BlackRock European Dynamic fund.

Shares in the group closed at £11.68 on Wednesday, down 12p or 1.02%.

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Key stats
Market capitalisation£3,317m
No. of shares out310m
No. of shares floating306m
No. of common shareholdersnot stated
No. of employees27733
Trading volume (10 day avg.)1m
Turnover£3,261m
Profit before tax£207m
Earnings per share61.98p
Cashflow per share76.65p
Cash per share156.82p

*Correct as at 31 Oct 2012

Canaccord sticks at 'hold' on AMEC

James Evans, analyst at Canaccord, has reiterated his 'hold' recommendation on engineering and design firm AMEC (AMEC.L) having attended a 'teach-in' on its oil and gas services business.

AMEC took the opportunity to repeat its expectation of double-digit underlying revenue growth in the natural resources division in the year ahead. Evans welcomed this target, but he noted that oil and gas accounts for just 30% of group earnings. 'We think that growth in oil and gas may be insufficient to overcome the headwinds in the rest of AMEC’s portfolio (oil sands, mining, renewables),' he said.

The concern over oil sands operations stems from rival WorleyParsons' recent comments that activity in the sector has been slowing.

'Despite this, AMEC still expects doubledigit underlying growth in 2013 in Natural Resources, as do we, although we have concerns over a mid-term slowdown in the Oil Sands impacting growth and margins,' he said.

Read Smart Investor's take on AMEC.

Shares in the group closed at £10.62 on Wednesday, up 4p or 0.38%.

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Key stats
Market capitalisation£59m
No. of shares out58m
No. of shares floating42m
No. of common shareholdersnot stated
No. of employees1067
Trading volume (10 day avg.)0m
Turnover£86m
Profit before tax£5m
Earnings per share7.82p
Cashflow per share13.74p
Cash per share15.35p

*Correct as at 31 Oct 2012

Peel Hunt cuts target price for Next Fifteen Communications

Malcolm Morgan, analyst at Peel Hunt, has reduced his target price for public relations firm Next Fifteen Communications Group (NFC.L) on news the business is delaying its results statement as it investigates a fraud in the US.

Early indications from NFC suggest the investigation is of a theft of cash from a business, not a misrepresentation of revenues and profit, Morgan said. 'Our understanding is that the underlying performance of the business is not impacted by this news,' he added.

Morgan said it appears the theft has taken place over the single financial year, and although the processes that allowed it to happen will need to change, the fact that it was picked up quickly offers some comfort.

The analyst is estimating a cash loss of £1.6 million and puts the cost of the investigation at £800,000, representing around 3p of value shareholders.

'We reduce our target price to 120p to reflect this loss of cash, but restate our Buy recommendation. We expect the share price to languish until the full details and scale of the loss are known,' he concluded.

Shares in the group closed at 102.25p on Wednesday, down 6.25p or 5.76%.

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