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The Expert View: Morrisons, BT and Just Eat

Our daily roundup of analyst commentary on shares, also including Boohoo and Wincanton.

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If you would like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites.

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Key stats
Market capitalisation£5,703m
No. of shares out2,324m
No. of shares floating1,984m
No. of common shareholdersnot stated
No. of employees56177
Trading volume (10 day avg.)9m
Turnover£18,116m
Profit before tax£647m
Earnings per share26.57p
Cashflow per share41.52p
Cash per share11.29p

Record Christmas shows Morrisons investment paying off, says Hargreaves

Morrisons (MRW) has recorded its best Christmas in seven years, showing its investment in technology and more competitive pricing has paid off, says Hargreaves Lansdown.

Shares in the supermarket jumped 4% on news that it is now expecting underlying profit before tax for the year to come in at £330 to £340 million, ahead of analyst consensus. The shares were trading up 3.7%, or 8.8p, at 246p at the time of writing.

‘Morrison has taken action on pricing and is now more competitive at the tills, which are ringing more often as the impressive growth in transaction numbers shows,’ said Hargreaves Lansdown analyst George Salmon.

‘With the group enjoying a record week at Morrisons.com, and a new automated ordering system helping to improve efficiency by lowering stock levels while still increasingly availability, it seems to be finally feeling the benefit of technological advances too.’

Salmon said after the positive update from Morrisons ‘all eyes will now be on the sector’s other big players, Tesco and Sainsbury’s, when they report later in the week’.

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Key stats
Market capitalisation£1,626m
No. of shares out1,123m
No. of shares floating632m
No. of common shareholdersnot stated
No. of employees908
Trading volume (10 day avg.)6m
Turnover£195m
Profit before tax£12m
Earnings per share1.10p
Cashflow per share1.37p
Cash per share5.19p

Bumper Christmas at Boohoo prompts Peel Hunt forecast upgrades

Online clothing retailer Boohoo (BOO) has upgraded forecasts again and Peel Hunt is expecting ‘significant upside’ over coming years.

Analyst John Stevenson retained his ‘buy’ recommendation and increased the target price from 160p to 180p on the stock following strong Christmas sales. The shares were trading up 0.9%, or 1.2p, at 144p at the time of writing.

‘Boohoo has announced group sales growth of 55%, well ahead of market expectations. We upgrade our top-of-the-range profit before tax forecasts by 7.8% to £29.5 million, earnings per share 2p,’ he said.

‘The highlight of [the recent] statement is the strong traction in the US market, with sales up 188% in local currency, driven by effective autumn/winter campaigns and price investment. We see little reason for this step-up in traffic and conversion to lose momentum in the new financial year, suggesting more significant upside to growth expectations for the next two to three years and more upgrades to come.’

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Key stats
Market capitalisation£38,554m
No. of shares out9,958m
No. of shares floating8,333m
No. of common shareholdersnot stated
No. of employees102500
Trading volume (10 day avg.)13m
Turnover£18,909m
Profit before tax£2,588m
Earnings per share29.70p
Cashflow per share59.88p
Cash per share39.30p

BT valuation is ‘undemanding’, says Barclays

A year of underperformance has made the valuation of telecoms giant BT (BT) look ‘undemanding’, according to Barclays.

Analyst Maurice Patrick retained his ‘overweight’ recommendation and target price of 525p on the stock, which was trading flat at 387p at the time of writing.

‘BT underperformed the sector materially in 2016 and its valuation look undemanding with 36% upside to our target price,’ he said.

‘Regulation remains an overhang, and there is clear political desire to increase fibre investment.'

He added that BT would still be able to grow its dividend by 10-15% a year over the next four years with net debt remaining flat ‘despite a £1 billion a year pension repair assumption’.

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Key stats
Market capitalisation£3,720m
No. of shares out678m
No. of shares floating554m
No. of common shareholdersnot stated
No. of employees1443
Trading volume (10 day avg.)2m
Turnover£248m
Profit before tax£23m
Earnings per share3.66p
Cashflow per share5.94p
Cash per share28.53p

Just Eat to ‘tread water’ as UK orders slow, says Jefferies

A fourth quarter update from takeaway ordering service Just Eat (JE) may be disappointing for investors, according to Jefferies.

Analyst David Reynolds retained his ‘buy’ recommendation and target price of £10.00 on the stock, which was trading down 5.6%, or 33p, at 549p at the time of writing.

‘In-line Q4 2016 order update from Just Eat, and having delivered five guidance upgrades in the last 20 months, likely to disappoint perhaps and the bears will home in on the deterioration in UK order growth,’ he said.

‘No real knocks to the thesis, just a reality check as the guidance upgrade conveyor belt comes to a stop. Expect to see modest earnings upside to full-year 2016 guide still, the initial full-year 2017 guide set to be somewhat damp – suspect stock treads water for a while.’

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Key stats
Market capitalisation£286m
No. of shares out124m
No. of shares floating114m
No. of common shareholdersnot stated
No. of employees17500
Trading volume (10 day avg.)m
Turnover£1,147m
Profit before tax£61m
Earnings per share47.36p
Cashflow per share59.85p
Cash per share21.25p

Wincanton contract loss doesn’t impact long-term outlook, says Liberum

Wincanton (WIN) may have lost a contract with Tesco but Liberum said this will not have a major impact on the logistics specialist.

Analyst Gerald Khoo retained his ‘buy’ recommendation and target price of 290p on the stock, with the shares trading 2.5%, or 6p, down at 234p at the time of writing.

‘Tesco has announced a major supply chain restructuring that will result in all warehousing operations being taken in-house. This will see contracts ended with outsourced suppliers like Wincanton,’ he said.

‘However, Wincanton only operates one warehouse on behalf of Tesco, so we see a limited financial impact on the group. We estimate that less than 2% of group revenue is at risk. Although disappointing, we see this as part of the usual ebb and flow of contract wins and losses, with no impact on our long-term positive stance.’

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