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The Expert View: Smith & Nephew, Pace and Oxford Instruments

Our daily roundup of the best analyst commentary on shares, also including Hyder Consulting and Wincanton.

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Key stats
Market capitalisation£8,156m
No. of shares out894m
No. of shares floating891m
No. of common shareholdersnot stated
No. of employees11000
Trading volume (10 day avg.)2m
Turnover2,617m USD
Profit before tax334m USD
Earnings per share0.37 USD
Cashflow per share0.61 USD
Cash per share0.09 USD

*Correct as at 3 Apr 2014

Smith & Nephew downgraded on weak Q1 fears

Medical technology business Smith & Nephew (SN.L) has been downgraded by Numis on fears of a poor first quarter.

Analyst Charles Weston downgraded the stock from ‘buy’ to ‘hold’ and placed a target price of £10.00 on the shares. Smith & Nephew was yesterday up 4p at 915.5p.

‘We expect the first quarter to be tough for the industry, with lower orthopaedic volumes following a stand-out fourth quarter that may have benefited from timing of ObamaCare law,’ he said. ‘Furthermore, Smith & Nephew has a tough comparative quarter…and competes in an increasingly price competitive…market.

‘We leave our £10.00 one-year price target unchanged, but expect the first quarter to be the most difficult period for the company this year.’

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Key stats
Market capitalisation£1,405m
No. of shares out314m
No. of shares floating282m
No. of common shareholdersnot stated
No. of employees1977
Trading volume (10 day avg.)1m
Turnover1,485m USD
Profit before tax58m USD
Earnings per share0.18 USD
Cashflow per share0.39 USD
Cash per share0.06 USD

*Correct as at 3 Apr 2014

Liberum initiates Pace coverage with a ‘hold’

Liberum has initiated coverage of set-top box developer Pace (PIC.L) with a ‘hold’ despite the stock being a ‘turn-around story’.

Analyst Eoin Lambe placed a ‘hold’ recommendation and a target price of 420p on the shares but still has concerns about the set-top box market. Pace was yesterday down 0.6p at 447.1p.

‘Pace has been one of the turn-around stories of UK technology,’ he said. ‘Management has done a terrific job reducing the cost base. However we believe that its core set-top box market is likely to decline as smart TVs and over-the-top services such as Netflix reduce demand.’

Lambe predicted two future outcomes; evolution into a platform that ‘controls the connected home’ or consolidation in the competitive set-top box market that ‘could boost margins’.

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Key stats
Market capitalisation£768m
No. of shares out57m
No. of shares floating53m
No. of common shareholdersnot stated
No. of employees1927
Trading volume (10 day avg.)0m
Profit before tax£21m
Earnings per share36.97p
Cashflow per share76.23p
Cash per share68.87p

*Correct as at 3 Apr 2014

‘Buy’ oversold Oxford Instruments, says Peel Hunt

Technology systems provider Oxford Instruments (OXIG.L) has been oversold according to Peel Hunt, which has upgraded the stock.

Analyst Henry Carver upgraded his recommendation from ‘hold’ to ‘buy’ and increased the target price 20% to £15.30. The shares were yesterday up 18p at £13.00.

Carver believes the shares have been oversold following Oxford’s acquisition of camera and microscope provider Andor – which lost a year’s growth because of currency headwinds. The company was also affected by poor margins in its nanoscience arm Omicron.

‘We have updated our medium term growth assumptions for Oxford Instruments to reflect the Andor deal and the slower than expected margin progression at Omicron, but conclude that the shares are oversold at these levels,’ he said.

‘Our revised analysis of organic and inorganic growth potential leads us to a new price target…we therefore upgrade our recommendation.’

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Key stats
Market capitalisation£182m
No. of shares out39m
No. of shares floating36m
No. of common shareholdersnot stated
No. of employees3997
Trading volume (10 day avg.)0m
Profit before tax£12m
Earnings per share30.79p
Cashflow per share47.23p
Cash per share82.63p

*Correct as at 3 Apr 2014

Hyder Consulting forges forward after profit warning

Design and engineering consultancy Hyder Consulting (HYC.L) has shaken off a profit warning to trade in line with expectations.

Panmure analyst Mike Allen reiterated his ‘buy’ recommendation and placed a target price of 538p on the shares although he said it would take a while for investor confidence in the firm to increase. The shares were yesterday up 8.6p at 449.9p.

‘Hyder has delivered a straight forward pre-closed statement confirming that it is trading in line with expectations following the profit warning in February,’ he said. ‘It looks like cash management has come in slightly ahead of previous guidance, with the company also acquiring an environmental consultant in Australia. We maintain our forecast assumptions for now, which are at the lower end of the consensus range and reiterate our “buy” recommendation.’

Allen added that ‘it will take time to build investor confidence’ but he believes the business ‘is well positioned over the medium term’.

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Key stats
Market capitalisation£145m
No. of shares out122m
No. of shares floating113m
No. of common shareholdersnot stated
No. of employees16000
Trading volume (10 day avg.)0m
Profit before tax£10m
Earnings per share8.41p
Cashflow per share28.81p
Cash per share72.47p

*Correct as at 3 Apr 2014

Wincanton is a ‘buy’ after share price fall

Logistics group Wincanton (WIN.L) has been upgraded after two years of consistent performance.

Investec analyst John Lawson upgraded the stock from ‘hold’ to ‘buy’ and placed a target price of 155p on the shares. He said the drop in share price recently was unwarranted and should be used as a buying opportunity. Shares in Wincanton hit a one-year high of 152p in January, but have since dropped, and yesterday were trading at around 120p.

‘Wincanton is delivering very solid results these days and FY14 should be no exception, in effect the second year of this consistency,’ he said. ‘This should please investors, we believe, and following the setback in the share price in recent weeks – for no apparent reason to us – we believe it represents a further buying opportunity.’

Lawson added that the current share price valuation was ‘too low’.

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