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The Expert View: GKN, St James's Place and BP

Our daily roundup of the best analyst commentary on shares, also including Tullett Prebon and Escher.

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Key stats
Market capitalisation£6,114m
No. of shares out1,641m
No. of shares floating1,634m
No. of common shareholdersnot stated
No. of employees49700
Trading volume (10 day avg.)4m
Turnover£7,136m
Profit before tax£395m
Earnings per share23.84p
Cashflow per share45.21p
Cash per share11.22p

*Correct as at 29 Jul 2014

GKN upgraded after focus moves back to value

Engineering group GKN (GKN) has been upgraded as currency headwinds appear to stabilise, meaning investors can refocus on the underlying value and prospects of the business, according to Numis.

Analyst David Larkham upgraded his recommendation from ‘add’ to ‘buy’ but kept his target price of 435p following ‘solid’ first half results for the company, which manufactures parts for cars and aeroplanes. Shares jumped 6.7% to 366p yesterday on the results.

‘The shares have underperformed the UK engineering sector in 2014 reflecting downgrades from currencies and land systems division,’ he said. ‘No further changes to forecasts and with currencies now appearing to have stabilised attention can move back to underlying value and prospects.’

He added that with 37% of earnings coming from its aerospace division and the car parts division making good progress, the shares, which are trading at a discount to the sector, looked ‘attractive’.

‘Hence we have upgraded to “buy” albeit further data points may be required before we see much upward traction,’ he said.

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Key stats
Market capitalisation£3,991m
No. of shares out519m
No. of shares floating468m
No. of common shareholdersnot stated
No. of employees985
Trading volume (10 day avg.)1m
Turnover£5,841m
Profit before tax£191m
Earnings per share36.73p
Cashflow per share38.10p
Cash per share746.43p

*Correct as at 29 Jul 2014

St James’s Place continues to break records

Peel Hunt has kept its ‘hold’ recommendation for St James’s Place (SJP) as record-breaking results for the financial sales force were nevertheless in line with investor expectations.

St James’s Place reported a 19% rise in funds under management to £47.6 billion in the first half of the year, a 20% rise in new business, while operating profits were up 12%. Dividend growth is likely to hit 40% over the year.

However, much of that rise is in line with investor expectations, prompting some profit taking in yesterday’s trading, with the shares sliding 2.4% to 771p.

‘SJP’s results were largely as expected, the business delivering strong sales and assets under management growth which is translating into another year of dividend growth, now expected to be 40%,’ said Duncan.

‘We expect our forecasts to move modestly higher, but make no change to our recommendations for now.’

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Key stats
Market capitalisation£528m
No. of shares out218m
No. of shares floating207m
No. of common shareholdersnot stated
No. of employees2603
Trading volume (10 day avg.)0m
Turnover£804m
Profit before tax£66m
Earnings per share30.09p
Cashflow per share35.00p
Cash per share129.15p

*Correct as at 29 Jul 2014

Tullett Prebon struggles in ‘revenue storm’

Wholesale financial broker Tullett Prebon (TLPR) is continuing to struggle amidst a ‘revenue storm’ just weeks after chief executive Terry Smith stepped down.

Liberum analyst Justin Bates retained a ‘sell’ recommendation and target price of 240p after profits for the first half of the financial year fell 31% to £43.2 million, earnings per share dropped 28% to 16p and the dividend per share was held flat at 5.6p.

‘Tullett continues to be battered by a revenue storm that shows no sign of abating,’ he said. ‘The stock has hit our target price but in light of these results and the cautious outlook we shall review forecasts and valuations.’

Bates said that while ‘on the face of it’ Tullett looked ‘attractively priced’ he was concerned about the group’s ‘long-term competitive position’.

Shares were trading at 240p yesterday.

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Key stats
Market capitalisation£89,861m
No. of shares out18,425m
No. of shares floating18,298m
No. of common shareholdersnot stated
No. of employees83900
Trading volume (10 day avg.)20m
Turnover223,258m USD
Profit before tax13,808m USD
Earnings per share0.72 USD
Cashflow per share1.15 USD
Cash per share0.73 USD

*Correct as at 29 Jul 2014

BP results show an ‘ongoing recovery of profitability’

Good results from petrol behemoth BP (BP) highlight an ongoing recovery in profits, according to Jefferies analyst Jason Gammel.

Gammel retained his ‘buy’ rating and target price of 570p following second quarter results showing net income of $3.6 billion (£2.1 billion) – 10% ahead of consensus. However, shares dipped 2.5% to 484.3p yesterday as the oil group warned of the potential impact of further sanctions against Russia due to its stake in Rosneft.

‘While earnings from Rosneft surprised on the upside, BP’s core businesses generally performed well over the second quarter and cash flow generation of $7.9 billion is encouraging,’ he said.

‘Our fundamental view on this stock is unchanged with these results highlighting the ongoing recovery of profitability in BP’s underlying upstream [exploration] operations.’

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Key stats
Market capitalisation£56m
No. of shares out19m
No. of shares floating12m
No. of common shareholdersnot stated
No. of employees166
Trading volume (10 day avg.)0m
Turnover15m USD
Profit before tax1m USD
Earnings per share0.03 USD
Cashflow per share0.08 USD
Cash per share0.21 USD

*Correct as at 29 Jul 2014

Escher reaping rewards of ‘bumper’ deal with US Postal Service

Software solutions provider Escher (ESCH) is benefiting from the deal to provide software to the US Postal Service in the biggest deal of its kind.

Panmure Gordon analyst George O’Connor reiterated his ‘buy’ recommendation and target price of 507p following first half results. Shares fell 3.5% to 292p yesterday.

‘Escher is trading in line with full-year estimates. As disclosed [on 9 June] the US Postal Service bumper license is now apportioned between the first half of the year and the second and pleasingly this – the largest contract ever signed in the global post office industry – continues to move ahead,’ he said.

‘We note a tease in the statement that Escher has invested in its postal point of service offer so that it “can be prepared for emerging opportunities in the global logistics space”. While no details were divulged we are intrigued with the comment but will have to await interims for more details.’

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