Broker snap: BofA upgrades Johnson Matthey after full-year beat

Bank of America Merrill Lynch (BofA) has upgraded its forecast for platinum refiner and chemicals group Johnson Matthey from 'neutral' to 'buy' after the company's forecast-beating full-year results on Thursday morning.The broker said that second-half earnings per share (EPS) from the company were 5.0% ahead of consensus estimates on what it considers an "optimal mix": "outperformance of the Environmental Technologies division aided by cost management and better-than-expected truck catalyst sales (growth of +9.0% against a decline of 5.0% for truck production)."BofA highlighted that the stock has underperformed the wider sector by 9.0% and the European market by 3.0% over the last 12 months. This was mainly due to the loss of a high return on capital employed (ROCE) business from Anglo Platinum and a cyclical earnings cuts linked to weaker European autos market."We now see an EPS upgrade cycle, given successful cost management in the second half, four-five months of stronger truck orders in the US and some improved 1Q13 data in Europe for truck book-to-bill's."The broker now expects 8.0%, 11% and 13% EPS growth for the years ending March 2014, 2015 and 2016, respectively.BofA said that Johnson Matthey is now its more preferred stock within the European autocatalysts/platinum group metals (PGM) chemicals sub-sector.The target price for the shares has been hiked from 2,400p to 2,950p.