The Expert View: Rentokil, Man Group and Barclays
Our daily roundup of the best analyst commentary on shares, also including International Airlines Group.
Peel Hunt warms to Rentokil recovery
Peel Hunt has upgraded British services firm Rentokil (RTO) from 'sell' to 'hold'. Analyst Christopher Bamberry said: ‘[Rentokil] has delivered reduced restructuring costs, better cash flow and 17 bolt-on acquisitions. With the group on the road to becoming a better business we have upgraded our recommendation from "sell" to "hold".’
The pest control to work wear group recorded a 7.7% increase in half-year profit, having pursued a restructuring programme last year. Operating profits increased to £110.2 million with the interim dividend up 10% to 0.77p per share.
Bamberry raised his target price to 114p from 108p adding: ‘In our opinion for the shares to progress further it will require Rentokil to demonstrate that the new strategy can successfully deliver accelerated organic growth as well as its MCA plans.’ The shares closed 1.5% or 1.8p lower on Friday at 116.7p.
Man Group downgraded as inflows fall
Panmure Gordon has downgraded Man Group (EMG) from 'buy' to 'hold' due to a drop in Q2 inflows. Analysts Keith Baird and Jeremy Grime said: ‘Equities disappointed. Due to that and the lack of visibility we are reducing our recommendation to "hold".’
Man Group recently underwent restructuring in order to lessen dependence on its AHL fund. While it has recovered by 9%, the firm is struggling.
Although funds under management climbed by 7% to $57.7 billion in the first half, Q2 inflows were 60% down on the first quarter.
Cautious optimism for Barclays amid structural concerns
Berenberg upgraded Barclays (BARC) from 'sell' to 'hold' after the bank’s second-quarter results proved better than expected.
Underlying profits fell by 8% as Barclays continued to shrink its investment banking business. The analysts expressed doubts about the organisation’s current makeup, saying: ‘Barclays is yet to justify why it should remain a universal bank.’
Chief executive Anthony Jenkins said he was ahead of target in cutting costs with 14,000 jobs to go this year. The bank also set aside a further £900 million for mis-sold payment protection.
Analysts James Chappell and Eoin Mullany maintained their price target. ‘Unlike some of its peers, Barclays has the ability to break its business up and maximise returns for shareholders while reducing the regulatory burden’, they said.
Barclays’ shares closed 2p lower on Friday at 224p.
BA owner beats forecasts
British Airways owner International Airlines Group (ICAG) has pleased analysts at Jefferies by announcing a 55% increase in second-quarter profits.
Operating profits of €380million (£302m) came in well above the €354million expected, with the group reiterating its guidance that full year profits would grow by at least €500 million. Mark-Irvine Fortescue and Ian Rennardson of Jefferies said the news provides ‘relief for investors’ after competitors Lufthansa and Air France recently issued profit warnings.
The analysts stuck to their ‘buy’ rating and price target of 480p, saying the weak share price was ‘incongruous’.
‘ICAG is not immune from the pricing pressures of industry capacity expansions, but structurally it’s better protected,' they said.
ICAG shares closed 2.75% or 9p higher on Friday at 340p.