The Expert View: Greggs, Weir and Sainsbury's

Our daily round-up of analyst recommendations and commentary, featuring Greggs, Weir, Sainsbury's, Tate & Lyle and Resolution.

Key stats
Market capitalisation	£526m
No. of shares out	101m
No. of shares floating	88m
No. of common shareholders	not stated
No. of employees	19504
Trading volume (10 day avg.)	0m
Turnover	£701m
Profit before tax	£45m
Earnings per share	44.29p
Cashflow per share	75.00p
Cash per share	19.78p

*Correct as at 19 Mar 2013

Canaccord upgrades Greggs on refurb plan

Today's preliminary results from Greggs (GRG.L) won't contain any big surprises, according to Canaccord analyst Wayne Brown, but the gradual shift in the bakery chain's strategy has persuaded him to upgrade the shares from 'sell' to 'hold'.

Although Brown said it's probably too soon for CEO Roger Whiteside to formally announce a new strategy given that he was only appointed in January, the last update did hint at Greggs' strategic direction.

Greggs looks set to close 30 stores this year (up from previous guidance of about 20), Brown said, while also refurbishing 200-300 shops - more than double the previous guidance.

'Our chief concerns have been that around 85% of its estate is located on the high street and the group lacks pricing power due to the deep value the brand is notorious for,' Brown said. 'It is this latter element that will benefit in time from the higher rate of refurbishments.'

It's too soon to call a full recovery, the analyst said, but general sentiment looks to be improving. His target price rises 28% to 485p.

Shares in the group closed at 520.3p on Tuesday, up 2.3p or 0.4%.

Key stats
Market capitalisation	£4,955m
No. of shares out	213m
No. of shares floating	210m
No. of common shareholders	not stated
No. of employees	11669
Trading volume (10 day avg.)	1m
Turnover	£2,538m
Profit before tax	£312m
Earnings per share	146.18p
Cashflow per share	186.65p
Cash per share	184.03p

*Correct as at 19 Mar 2013

Berenberg Bank downgrades Weir

Berenberg Bank analyst Alexander Virgo has downgraded oil and gas industry engineer Weir (WEIR.L) from 'buy' to 'hold' following the rise in the shares over the year so far.

Although Virgo has above-consensus earnings projections for Weir, he said its performance in the year to date and the recovery in its valuation mean he can't see much upside to the share price for now.

'Valuation has recovered but stock now looks fairly valued,' Virgo said.

'Despite the likelihood of underlying technical support as short sellers continue to reduce their positions, Weir’s year-to-date performance (+28%) and recovery in valuation (15x near-term price to earnings, 2.2x enterprise value/Sales vs. earnings margins of 18%) mean we struggle to see significant upside from current share price levels.'

Shares in the group closed at £23.32 on Tuesday, down 98p or 4%.

Key stats
Market capitalisation	£7,015m
No. of shares out	1,888m
No. of shares floating	1,650m
No. of common shareholders	not stated
No. of employees	48800
Trading volume (10 day avg.)	5m
Turnover	£22,294m
Profit before tax	£598m
Earnings per share	31.51p
Cashflow per share	56.85p
Cash per share	39.24p

*Correct as at 19 Mar 2013

Sainsbury's reports strong fourth quarter

Shore Capital analyst Clive Black has increased his earnings estimates for Sainsbury's (SBRY.L) after the supermaket giant confirmed that it has outpaced its rivals over the past quarter.

Ex-fuel like-for-like (LFL) sales increased 3.6% in the 10 weeks to 16 March, beating Black's 2.25-2.75% estimate. This was the strongest quarter in the year for Sainsbury's, and significantly ahead of the other big grocers. Black has upgraded his full-year earnings estimate by £6 million to £824 million.

Morrisons fourth-quarter update showed sales down 4.1% (although the period covered was slightly different), while Black expects Tesco to deliver between -0.5% and -1%.

'All credit to Sainsbury’s in regaining momentum post a somewhat subdued Christmas trading period by its own exacting standards in recent times,' Black said. 'Sainsbury stock as performed reasonably well in recent weeks, perhaps reflecting its sector outperformance from a trading perspective and its low association with the recent food adulteration issues.'

However, the analyst said the valuation on the shares is 'in the fair to middling bracket', and he reiterated his 'hold' recommendation.

Shares in the group closed at 371.8p on Tuesday, up 6.6p or 1.8%.

Key stats
Market capitalisation	£3,905m
No. of shares out	466m
No. of shares floating	459m
No. of common shareholders	not stated
No. of employees	4636
Trading volume (10 day avg.)	2m
Turnover	£3,088m
Profit before tax	£303m
Earnings per share	63.80p
Cashflow per share	86.76p
Cash per share	91.06p

*Correct as at 19 Mar 2013

Deutsche Bank predicts strong results from Tate & Lyle

Investors are set to enjoy a sweet treat from ingredients maker Tate & Lyle (TATE.L) when it unveils its annual results next week, according to Deutsche Bank analyst Harold Thompson.

Thompson expects Thursday's update to show modest profit increases in bulk ingredients and strong top-line growth in food ingredients. 'Overall, we forecast modest earnings per share (EPS) progress for the year,' he said.

'We have increased our 2014 EPS forecast by 2%, with foreign exchange rate changes explaining the majority of the move. Given a changing group profile towards the ingredient industry, at what we see as an attractive valuation, buy.'

Shares in the group closed at 837.5p on Tuesday, up 5p or 0.6%.

Key stats
Market capitalisation	£3,805m
No. of shares out	1,418m
No. of shares floating	1,412m
No. of common shareholders	not stated
No. of employees	5733
Trading volume (10 day avg.)	3m
Turnover	£4,104m
Profit before tax	£-62m
Earnings per share	-4.35p
Cashflow per share	46.36p
Cash per share	248.13p

*Correct as at 19 Mar 2013

JP Morgan rolls forward Resolution's target price

JP Morgan analyst Ashik Musaddi has increased his target price for London-headquartered insurance company Resolution (RSL.L) ahead of next week's annual results, although he's maintaining an 'underweight' stance on the shares.

Musaddi's target price goes from 227p to 257p and he expects operating profit of £326 million for 2012. 'We see some improvement in UK life earnings, partly offset by corporate cost of debt,' he added.

'We forecast earnings will remain under pressure in the Friends Provident International business due to continuing increased new business strain.'

The analyst is predicting the dividend to come in at 21.14p for 2012, in line with the management's guidance.

Shares in the group closed at 268p on Tuesday, up 1p or 0.4%.