Broker tips: BP, Vodafone, Compass

While BP still remains in transition mode in 2011, Credit Suisse says the shares continue to offer good valuation upside despite the uncertainty surrounding its Macondo well liabilities.The oil giant gave its first strategy update since the oil spill in April, in which it unveiled a "solid strategy of upstream volume growth, net asset value (NAV) accretion through active portfolio management, and refining and marketing repositioning with the sale of two US refineries," says analyst Kim Fustier.Despite trimming 2011-13 earnings per share forecasts by 3% to account for lower production guidance, Fustier says "BP's shares continue to offer good valuation upside both on NAV and multiples.""However, uncertainty around Macondo liabilities will overhang the shares for another 12 months in our view - we do not expect a ruling on gross negligence before the second half of 2011 at best."BP is given an 'outperform' rating and target price of 585p.RBS expects steady revenue trends in the third quarter for mobile telecoms giant Vodafone, but with shares trading at a 20% premium to its large-cap peers, the broker says the group appears priced more like a growth stock.Vodafone will release its third quarter interims on Thursday, in which RBS expects to see Spain and Italy continue to register negative organic service revenue growth for the second quarter in a row, at -7.2% and -1.2% respectively.The Indian market, however, is forecast to see 15.6% revenue growth in the three month period (from 15.7% in the preceding quarter). According to an Indian regulator, Vodafone added 2.5m subscribers in October and 3.1m in November. On this run rate, the broker estimates that the group will meet its forecast of 8.3m net adds for the third quarter."We believe Vodafone is still priced beyond perfection," says RBS. "[The group's] 2011 price-to-earnings ratio of 13.2 gives it full credit for its share of Verizon Wireless (VZW) earnings [30% of Vodafone's value] and is at a premium of about 24% to the sector."Vodafone is given a 'sell' rating and target price of 140p. Even though Compass has underperformed the FTSE 100 in the past six months, Panmure Gordon predicts ongoing upside potential for the contract caterer.The broker notes that over the 2006-10 period, shares appreciated 150% (versus a 5% increase in the FTSE 100) after the group exited loss-making contracts and countries, reduced debt and returned cash to shareholders. However, over the past half year, the stock has underperformed the index by around 7%."Yet we think Compass will continue to be disciplined in its renewed quest for growth," the broker says. "The company has done a more than capable job of managing and then beating the market's earnings expectations. In a business with few obvious external lead indicators, we expect this to continue and believe the risk to forecasts is on the upside.""We believe a combination of additional cash returns to shareholders and investors' preferences for relatively defensive stocks means that the share price offers ongoing upside potential," the broker adds.Panmure initiates coverage with a 'buy' recommendation and 636p target price.