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The Expert View: BG Group, EasyJet and Weir
by Harry Brooks on Sep 10, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including DS Smith and Marks & Spencer.
Our daily round-up of analyst recommendations and commentary, featuring BG Group, EasyJet, Weir, DS Smith and Marks & Spencer.
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BG Group battered on guidance cut
A disappointing production update from BG Group (BG.L) will hold back the shares for now, but the long-term investment case remains intact, according to Liberum Capital.
The shares dropped around 5% yesterday after BG cut its production outlook for next year as a result of delays to new projects in Egypt and Norway. The disappointing update follows its announcement back in February that it's no longer planning to hit the 1 million barrels a day mark by 2015.
Despite the knock, Andrew Whittock remains positive. 'The long-term growth case appears intact with the critical developments in both Australia and Brazil on track,' he said.
'The shares may look relatively expensive (2013 price to earnings of 16x) but we still believe this is justified by the long-term growth profile. We retain our Hold recommendation, based on our £12.75 value of today’s assets. There could be significant upside to valuations if the market re-finds its belief that BG is a growth share.'
Shares in the group closed at £12.17 on Monday, down 65p or 5.1%.
BoA picks EasyJet over Ryanair
EasyJet (EZJ.L) is rapidly pulling away from rival airline Ryanair (RYA.L), according to Bank of America Merrill Lynch.
Next month's fourth-quarter trading update should see continued robust yield performance, analyst Mark Manduca said, and there's also the possibility of a special dividend.
'With the tailwinds of both allocated seating and increased business mix, we expect easyJet to be less affected by the upcoming European short-haul winter capacity hike; particularly when compared alongside peer Ryanair,' Manduca said.
'We also note that easyJet has significant medium-term M&A risk, and we cite the case of Stelmar Shipping as an indication of founder Sir Stelios’ intentions.'
Manduca reiterated his 'neutral' recommendation on EasyJet, and his 'underperform' stance on Ryanair.
Shares in the group closed at £12.67 on Monday, up 12p or 1%.
Weir Group's a key pick for Barclays
Weir Group (WEIR.L) remains a key pick for Barclays, which argues the oil pump maker will reap the rewards as the US oil industry activity ramps up.
'With substantial data supporting an uptick in US land activity, we recommend investors increase exposure to Weir,' analyst Nick Webster said.
'The recovery in US onshore oil & gas is clearly underway with rig counts, well counts and permit data all supportive of a stronger second half... We think this plays to Weir’s strengths, with a strategy to drive technology advances, add products through acquisitions, and also its strong service footprint.'
Webster has a target price of £25.20 on the shares, and an 'overweight' recommendation.
Shares in the group, which is a member of Citywire Top Stocks, closed at £22.79 on Monday, up 24p or 1.1%.
JP Morgan backs DS Smith
Recycled packaging specialist DS Smith (SMDS.L) holds plenty of promise for investors, according to JP Morgan, which has an 'overweight' recommendation on the shares.
'DS Smith doesn’t really go in for catchy slogans,' analyst Alexander Mees said. 'But if it did, ''more than a box'' would encapsulate the message articulated at the Capital Markets Day in Brussels last week.'
DS Smith, which is another member of Citywire Top Stocks, sees three three key strategic drivers for the medium-term:
- European fast-moving consumer goods: this is the most attractive market for growth, the company believes, and is targeting at least 65% of revenues from this sector over the medium term (up from 60% currently).
- Germany and Central and Eastern Europe: growth should be especially strong here, the company believes, and it's targeting 5% and 8% per annum revenue growth respectively.
- Innovation: the company now spends more on R&D than legacy DS Smith and legacy SCA Packaging combined.
Shares in the group closed at 277.6p on Monday, up 4.5p or 1.7%.
'Sell' Marks & Spencer, Cantor Fitzgerald says
Marks & Spencer (MKS.L) is heading in the right direction, according to Cantor Fitzgerald, but the shares remain a 'sell' as profits remain rangebound.
Analyst Freddie George paid a visit to its 'Pantheon' store on Oxford Street, where he was broadly in favour of moves to group an increasing amount of womenswear by category rather than brand.
'The company, in our view, is taking the right approach and developing womenswear,' he said. 'However, we do have a number of concerns.'
First, the analyst said the changing plan for womenswear is going to take a while to result in any improvement in sales, meaning profits are likely to remain in the £650 million to £750 million range over the next three years.
Development of the international brand also won't be an easy fix, and debt levels are likely to remain above £2 billion, George added.
Shares in the group closed at 500.5p on Monday, up 1.8p or 0.4%.