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The Expert View: Marks & Spencer, WH Smith and Balfour Beatty

Our daily roundup of the best analyst commentary on shares, also including Hays and WS Atkins.

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Key stats
Market capitalisation£7,217m
No. of shares out1,632m
No. of shares floating1,566m
No. of common shareholdersnot stated
No. of employees57518
Trading volume (10 day avg.)6m
Profit before tax£454m
Earnings per share28.20p
Cashflow per share56.65p
Cash per share13.01p

*Correct as at 10 Apr 2014

M&S struggles to replicate Next success

High street stalwart Marks & Spencer (MKS.L) is failing to impress analysts who see better value elsewhere.

Peel Hunt analyst John Stevenson retained a ‘hold’ recommendation and a target price of 525p on the shares. Shares were trading down 14p, or 3.1%, at 442p yesterday.

Although fourth quarter trading was in line with expectations it was not enough to convince Stevenson.

‘While management can point to slight improvements in clothing performance, the pace and scale of recovery continues to lag competitors, in particular Next (NXT.L),’ he said. ‘Indeed we have seen Next double its sales guidance range for the year ahead, a level of performance and execution unlikely to be matched at M&S.’

He added: ‘We see no reason to own the shares ahead of Next or mid-cap growth stocks.’

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Key stats
Market capitalisation£1,411m
No. of shares out100m
No. of shares floating93m
No. of common shareholdersnot stated
No. of employees17407
Trading volume (10 day avg.)0m
Profit before tax£85m
Earnings per share84.74p
Cashflow per share105.67p
Cash per share237.14p

*Correct as at 10 Apr 2014

WS Atkins share price increase leads to downgrade

Numis has lowered its rating for design and engineering consultancy WS Atkins (ATK.L) after an increase in the share price.

Analyst Will Wallis downgraded his recommendation from ‘buy’ to ‘add’ but increased the target price to £16.50. Yesterday, shares were flat at £14.16.

‘With a lower assumed long term underlying tax rate, little change to our pension deficit assumption, and operational improvements offsetting currency effects, we raise our price target,’ he said. ‘With the shares well up since we set our previous target, we lower our recommendation from “buy” to “add”.’

Wallis added that the full year 2014 trading update for Atkins was in line and management was ‘comfortable with profit before tax consensus for full year 2015 despite higher pension interest’.

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Key stats
Market capitalisation£2,134m
No. of shares out1,406m
No. of shares floating1,290m
No. of common shareholdersnot stated
No. of employees7979
Trading volume (10 day avg.)3m
Profit before tax£72m
Earnings per share5.06p
Cashflow per share6.73p
Cash per share2.86p

*Correct as at 10 Apr 2014

Recruiter Hays to benefit from UK and Europe recovery

Liberum has reiterated its ‘buy’ recommendation for recruitment company Hays (HAS.L) as analysts expect it to benefit from UK and European economic recovery.

Analyst David Brockton reiterated a ‘buy’ and placed a target price of 145p on the shares. The shares were trading up 6.7p, or 4.7%, at 151p yesterday.

Brockton said the third quarter signalled ‘a 4% forecast profit upgrade reflecting acceleration in underlying trading conditions’. Although the group will suffer a headwind from pressure in Australia it ‘is well placed to deliver strong earnings growth’, he said.

‘Underlying net fee growth has accelerated from +3% to +8% year on year,’ said Brockton. ‘Australia headwind is receding as UK and Europe accelerates. ‘

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Key stats
Market capitalisation£1,367m
No. of shares out121m
No. of shares floating114m
No. of common shareholdersnot stated
No. of employees14723
Trading volume (10 day avg.)0m
Profit before tax£87m
Earnings per share68.50p
Cashflow per share96.06p
Cash per share25.20p

*Correct as at 10 Apr 2014

WH Smith heading for double digit earnings

Cantor is predicting double digit earnings growth for WH Smith (SMWH.L) over the next three years.

Analyst Freddie George retained a ‘hold’ recommendation but increased the target price on the shares from £10.00 to £11.00. Yesterday they were trading 10p, or 0.9%, at £11.60.

‘The stock has an impressive track record, 13% per annum earnings per share growth over the last five years, a strategy that should lead to double digit earnings growth over the next three years and a low rating relative to the sector,’ said George.

He added that the shares were trading at a small discount to the sector with an attractive yield of around 3%. The stock has risen almost 15% since the beginning of the year.

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Key stats
Market capitalisation£2,046m
No. of shares out689m
No. of shares floating686m
No. of common shareholdersnot stated
No. of employees50304
Trading volume (10 day avg.)1m
Profit before tax£17m
Earnings per share2.48p
Cashflow per share14.58p
Cash per share87.66p

*Correct as at 10 Apr 2014

Balfour Beatty agrees dispute settlement

A lower than expected dispute settlement has led Jefferies to adjust its target price for infrastructure business Balfour Beatty (BBY.L).

The company’s engineering arm Parsons Brinckerhoff won a long-running dispute in the US but the settlement was lower than expected, meaning revenue in 2014 will take a £12 million hit.

This led analyst Anthony Codling to adjust the target price from 406p to 403p although he retained a ‘buy’ rating. The shares were trading 4.9p, or 1.6%, lower at 302p yesterday.

‘The contract settlement does not directly impact the ongoing business, it is a self contained issue and therefore we are not adjusting our investment case,’ he said. ‘We continue to believe that we are at the low point in the cycle and at or around the last round of downgrades across the sector.’

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