Broker tips: Insurers, Domino's Pizza, Falkland Oil

With the results season for insurers about to kick off now might be a good time to invest in Legal and General (L&G) and Aviva, suggests Nomura Securities, with both companies likely to report strong cash generation and earnings to support their handsome dividend yields.Nomura is forecasting that L&G will bump up its interim dividend by 24% to 1.38p, reflecting its strong earnings, while Aviva is expected to improve its interim pay-out by 6% to 9.5p."We expect L&G to report continued strong cash and IFRS [international financial reporting standards] earnings following its extraordinary growth in 2009. Although we expect a slowdown in earnings in 2010, we think cash generation is still sufficiently strong to support a significant step-up of 24% in its interim dividend," Nomura analyst Nick Holmes said."We expect Aviva to report 13% IFRS earnings growth and to demonstrate that it can cover its increased dividend with cash generation; however, we expect pressure to remain on its NAV [net asset value] with its IFRS NAV likely to fall by 6% to 371p (MCEV [market consistent embedded value] NAV: 462p) owing to negative equity markets and further growth in its pension deficit," Holmes added.Pizza delivery firm Domino's Pizza had a strong second quarter, Panmure Gordon concedes, but not strong enough to persuade the broker from changing its advice to exit the shares.The broker has upgraded its full year earnings estimates by 4%, however, and now predicts profit before tax of £35m, a little above the £34.11m market consensus prevailing before this morning's half-yearly report, and earnings per share of 15.7p, versus consensus of 15.41p.As a result of the change to the profit forecasts the price target is increased to 314p from 300p, but the stock still remains a "sell" in Panmure Gordon's eyes, as the broker is expecting a dramatic slow down in the growth of like for like (LFL) sales in the second half of the year."We continue to expect LFL sales growth to slow dramatically in H2 [second half] principally reflecting the lapping of the Two for Tuesday campaign which we believe contributed 2-3% points to Q3 [third quarter] 2009A [actual 2009 figures] LFL sales growth of 10.8%," Panmure Gordon explained."The biggest impact appears to have been in the first few weeks of the promotion when in two consecutive weeks the number of pizzas ordered on a Tuesday increased to over 6,500 (versus 2,000 historically) and we therefore believe the group may struggle when it laps these tough comparatives in July and August," the broker added.The share price of Falkland Oil and Gas (FOG) has virtually halved after the company's Toroa F61/5-1 exploration well in the East Falkland basin turned up dry, and the only consolation for shareholders would appear to be that the shares were down by almost two thirds at one stage.House broker Oriel Securities was putting a brave face on things, saying that the oil explorer's shares "will obviously come under pressure today but we would highlight that exploration is at early stage in this large frontier basin with significant remaining prospectivity."Oriel's Richard Rose noted that "Toroa was not the partner group's first choice prospect, its selection dictated by rig constraints; however the well has provided useful geological data which should help refine future prospects."Keith Morris at Evolution Securities also looks on the bright side of things, observing acidly: "No doubt those with a lack of appreciation of geography (let alone geology) will "beat up" all the Falklands exploration companies as a result. However, smart investors will be aware of the massive geological and geographical 'gap' between the South and North Falklands basins - the latter having been massively derisked by [Rockhopper's] Sealion discovery.""Attention will switch to the next prospect to be drilled - Ernest - a structure similar to the successful Sealion discovery in the North Falklands Basin," Morris added.