Citywire printed articles sponsored by:
View the rest of this gallery online at http://citywire.co.uk/wealth-manager/gallery/a713612
The Expert View: Shell, AstraZeneca and Travis Perkins
by Harry Brooks on Nov 01, 2013 at 05:01
A roundup of analysts' commentary on shares, also including Countrywide and M&S.
Our daily round-up of analyst recommendations and commentary, featuring Shell, AstraZeneca, Travis Perkins, Countrywide and M&S.
If you'd 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. To buy shares via JP Morgan, click on the shopping trolley icon.
Shell hit by profits slide
Investec has put its recommendation for Shell (RDSA.L) under review following what it called a 'sizeable earnings miss' from the oil major.
Third-quarter profits missed consensus expectations as a result of weak refining margins, higher production costs and stoppages in Nigeria. Earnings came in at $4.5 billion, missing the estimate of $4.9-$5.1 billion and down from $6.6 billion a year ago.
'A sizeable earnings miss, higher capex guidance plus no quantification of its disposal programme do not make a happy combination,' Investec's Neill Morton said.
'The numbers are not quite as disappointing as they first appear (eg. year to date cash flow still covers net capex and dividends), but arguably still raise question marks over Shell’s communication with the market.'
Shell makes up some 7.5% of the FTSE 100, so the decline in its shares made a hefty impact on the wider market yesterday.
Shares in the group closed at £20.77 on Thursday, down 107p or 4.9%.
AstraZeneca misses expectations
Shore Capital has reiterated its 'buy' recommendation on pharmaceutical giant AstraZeneca (AZN.L), even though its third-quarter update missed expectations.
Sales of $6.25 billion missed Shore Capital's forecast of $6.40 billion, and earning per share were also light at $1.21 compared with the analysts' prediction of $1.25 and a consensus of $1.24.
Generic competition to some of AstraZeneca's key drugs was again cited as a reason for the weaker results.
Nonetheless, analyst Brian White is keeping faith in the group. 'These are still early days in the tenureship of the new CEO Pascal Soriot,' he said. 'We have already seen the impact of the acceleration on the pipeline with several phase three trials starts during 2013.'
Shares in the group closed at £32.81 on Thursday, down 48.8p or 1.5%.
Travis Perkins now a 'hold', Berenberg Bank says
Berenberg Bank has upgraded Travis Perkins (TPK.L) from 'sell' to 'hold', arguing the resurgent UK construction industry should galvanise the builders' merchant.
'As one of the largest distributors of building materials in the UK, Travis Perkins is well positioned to benefit from an upturn in construction activity,' analyst Michael Watts said. 'We estimate that the group has a 20% exposure to new housing and over 50% to renovation.'
The group will host an investor event on 3 December, which Watts said should provide valuable clues about the firm's strategic direction. 'We expect an update on how aggressively future expansion opportunities will be pursued or whether the group will place greater emphasis on getting more out its existing branch network,' he said.
Watts' target price rises from £13.30 to £18.80.
Shares in the group closed at £18.39 on Thursday, down 8.8p or 0.5%.
Jefferies lifts target price for Countrywide
Jefferies has bumped up its target price for estate agent Countrywide (CWD.L), which it rates a 'buy', saying the government's housing stimulus schemes can only help the business.
Analyst Anthony Codling's target price goes from 604p to 750p, and his earnings forecast for the year rises 6.6% to £80 million. 'These upgrades are driven by changes to our housing transaction assumptions, which we now expect to grow by 10% in 2014 and 2015,' he said.
'In our view we can clearly see the fruits of the Government's labours in the wording of Countrywide's Q3 IMS. The impact of FLS and Help to Buy on mortgage supply and mortgage pricing are helping to increase activity in the UK housing market of which we believe Countrywide to be a major beneficiary.'
Shares in the group closed at 568.7p on Thursday, up 5.7p or 1%.
'Sell' Marks & Spencer, Cantor Fitzgerald says
Cantor Fitzgerald has reiterated its 'sell' recommendation on Marks & Spencer (MKS.L) ahead of Tuesday's interim results, predicting another decline in profits.
'We expect the company will report pre-tax profits -11% to £265 million vs. a current consensus of between £235 million and £280 million,' analyst Freddie George said.
The warm weather in the later part of last month will have led to weak clothing sales, he said, and he also expects margins in general merchandise to be down as a result of promotional activity and weaker sales of 'aspirational' goods.
'The stock has risen 25% despite FY14 earnings being downgradedby almost 10% during the year,' he added.
'On our forecasts of a FY14 pre-tax profit of £665 million (earnings per share: 30.6p), after taking into account the increase of circa £15 million in IAS 19 pension costs, the stock is rated at 16.1x FY14 earnings and is now similarly valued to Next on the basis of earnings.'
Shares in the group closed at 503.5p on Thursday, up 10.3p or 2.1%.