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Broker tips: United Utilities, Prudential, service sector

Thu, 13th Oct 2016 13:50

(ShareCast News) - United Utilities got a boost on Thursday as Societe Generale upgraded the stock to 'buy' from 'hold', noting that recent share price weakness now implies a total shareholder return of 18%.The stock has underperformed the FTSE 100 by 11% since the 2 October Tory Party conference.SocGen said European regulated utilities have suffered recently on the back of the "taper tantrum" from press comments regarding the European Central Bank's bond-buying programme and sterling weakness resulting from comments at the Tory Party Conference.During this time, UU has been the worst performer among UK utilities despite the benefit which should accrue from higher inflation, it said."While nominal gilt yields have recently risen (+25 basis points), they remain 40bp below pre-Brexit levels, and inflation expectations have picked up," SocGen said."We estimate the effect of higher inflation is equivalent to 1-2% per annum on the UU equity value for every 100 basis points of higher than expected RPI, and therefore on an absolute basis higher inflation and lower real gilt yields should be viewed as value accretive." Prudential shares fell on Thursday as Societe Generale lowered its rating on the stock to 'sell' from 'hold' and cut its target price to 1,250p from 1,400p.Societe Generale said Prudential is on its list of least preferred stocks as it believes its it most vulnerable to the "growing cocktail" of variable annuity risks."Not only are Pru's future sales and earnings looking challenged, but also the back-book may come under pressure," the broker said."Its hedging has been effective so far but has not been tested in a bear market."The financial services company reduced its earnings per share forecasts for fiscal years 2017 and 2018 by 3% and 4% respectively, due to lower estimates for variable annuity sales and profit margin.Societe Generale also cut its dividend per share expectations by 5% for 2017 and 9% for 2018. RBC Capital Markets initiated coverage of several stocks and changed its recommendations as it took a look at the business services sector.The bank started Ashtead at 'outperform' with a 1,580p price target, saying it sees a robust US market, while the branch rollout and disciplined capital allocation should lead to above-average growth at an attractive valuation.RBC initiated coverage of Johnson Service Group at 'outperform' with a 130p price target, saying good organic growth and the potential to consolidate more of the UK textile market should lead to strong growth. It added that the stock's valuation is attractive and said it sees Johnson as a consolidation candidate in the medium term.RBC Capital upgraded G4S to 'outperform' from 'sector perform' and lifted the price target to 260p from 170p. It said it now sees value after the selloff in the shares and noted the company's low UK exposure.It downgraded Intertek to 'underperform' from 'sector perform' and kept the price target at 3,400p, saying the stock was up with events and a pause for breath is due. RBC noted the shares have outperformed the FTSE 100 by 32% in the last 12 months. "We like the structural growth characteristics, market position and the new CEO's strategy but feel relatively low organic growth and valuation are limiting factors to further short-term potential upside."It downgraded Mitie to 'sector perform' from 'outperform' and slashed the price target to 195p from 310p. It said trading was likely to remain tough through 2017 and 2018, the balance sheet is increasingly stretched and there are few catalysts on the horizon.RBC cut Rentokil to 'outperform' from 'top pick' after the strong run in the stock, but lifted the price target to 260p from 240p. "Whilst the stock has performed well, we see earnings risk on the upside and improving mix should continue to provide scope for further rerating. M&A optionality is arguably in the share price for free." However, RBC said Rentokil remains its favoured larger cap defensive in the sector.It changed its recommendation on Travis Perkinsto 'sector perform' from 'outperform' and cut the target to 1,450p from 2,000p, pointing to tougher times ahead. "We are fans of what Travis is doing re stamping its scale advantages on the market. However, investment is still going in when markets are more uncertain. With some leading indicators rolling over and Brexit uncertainty likely to remain, we see forecast uncertainty given the inherent leverage in the business."Finally, the bank downgraded WS Atkins to 'sector perform' from 'outperform', moving the target to 1,500p from 1,400p. RBC said the stock has performed well, outperforming the FTSE 100 by 11% in the last three months, but trading is still tough in some areas. "Whilst multiples are undemanding, we believe we need to see genuine organic growth improvements to see a further re-rating."
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LONDON (Alliance News) - QinetiQ Group PLC said on Thursday that it is in repricing discussions with the UK Ministry of Defence for a 25-year long-term to

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8 Feb 2017 07:52

WS Atkins trades well though Middle East remains shaky

(ShareCast News) - Design, engineering and project management consultancy WS Atkins provided its third quarter trading update for the period from 1 October 2016 to date on Wednesday, saying it traded in line with expectations during the period with continued currency benefits as anticipated, and the

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30 Jan 2017 15:30

WS Atkins climbs despite silence over CH2M talk

(ShareCast News) - Although its shares climbed steadily on Monday, engineer WS Atkins has refused to comment on reports that it has been approached by US peer CH2M Hill over a possible $4bn merger. The Times said privately owned CH2M, which has worked with the UK company on projects such as the T

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30 Dec 2016 12:27

UK Dividends Calendar - Next 7 Days

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12 Dec 2016 07:13

Atkins to sell minority stake in M25 for £66m

(ShareCast News) - Engineering firm WS Atkins has agreed to sell its minority investment in the M25 motorway to a consortium of institutional investors for £66.3m. The FTSE 250 company will sell its private finance initiative in the motorway to Edge Orbital Holdings, which is being advised by broker

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5 Dec 2016 09:33

BROKER RATINGS SUMMARY: Citi Raises BHP, Anglo, Rio Tinto And South32

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21 Nov 2016 15:01

Broker tips: European recruiters, Mitie, WS Atkins

(ShareCast News) - HSBC upgraded staffing groups Page, Hays and SThree to 'buy' ratings as the sector is seen as a key beneficiary of impending inflation. Trading down at the low end of where they would expect to be in the cycle compared to industrial stocks, HSBC said recruiters are cheaper relativ

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21 Nov 2016 10:32

WINNERS & LOSERS SUMMARY: Essentra Shares Sink After Profit Warning

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21 Nov 2016 09:36

WS Atkins slumps on Liberum downgrade

(ShareCast News) - WS Atkins was under the cosh on Monday as Liberum downgraded the stock to 'hold' from 'buy' and cut the price target to 1,600p from 1,720p after the company's first-half results last week. The brokerage said first-half fully diluted earnings per share were exactly in line, with 13

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21 Nov 2016 08:23

LONDON BRIEFING: Essentra And Mitie Woes Sink Midcap Index

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17 Nov 2016 08:02

WS Atkins H1 statutory profit down, underlying profit up

(ShareCast News) - FTSE 250 engineering consultancy WS Atkins reported a 14% rise in first-half underlying pre-tax profit but a drop in statutory profit, as it maintained its outlook for the year. In the six months to the end of September, underlying pre-tax profit rose to £63.6m from £55.8m on reve

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17 Nov 2016 07:50

WS Atkins Says Outlook Unchanged Despite US Period Of Uncertainty

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10 Nov 2016 16:17

UK Earnings, Trading Statements Calendar - Next 7 Days

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8 Nov 2016 12:11

FTSE 250 movers: JLT and Tullett jag lower, Evraz rides steel spike

(ShareCast News) - The FTSE 250 was led moderately lower on Tuesday as most markets moved skittishly sideways ahead of a US election that is seen as having potentially widespread implications for the global economy. The expected boost to volatility from global markets was behind a rise of interde

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