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The Expert View: Smith & Nephew, Pace and Oxford Instruments
by Michelle McGagh on Apr 04, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Hyder Consulting and Wincanton.
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.’
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’.
‘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.’
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’.
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’.