Broker tips: Vodafone, Schroders, Unilever

Mobile phone titan Vodafone's upbeat trading statement on Thursday should improve sentiment and encourage a premium rating for the stock, Nomura Research believes. "Vodafone's US exposure should also command a premium given the more co-operative atmosphere at Verizon Wireless," where Vodafone holds a 45% stake. The US mobile phone network is widely expected to resume paying dividends soon, which would provide Vodafone with a welcome additional revenue stream.Nomura said the trading update provided evidence of improving relative performance to its peers, with the UK being the main highlight this time round. "Areas of weakness are localised to uncontrolled macro issues," the broker suggested."Data growth picked up to 27% at group level and was stable at 23% in Europe. Rates of smartphone adoption continue to increase rapidly, notably in Italy and Germany this quarter. Overall smartphone penetration of the base is 17% but data attach rates are only 46%. While the attach rates might be seen as disappointing, it also serves to highlight that the smartphone story remains in its infancy," Nomura said.The broker has made some minor tweaks to its earnings forecasts. "We are forecasting group organic growth to fall from 2.1% for fiscal 2011 (FY11) to 0.5% for FY12 before recovering to 2.1% in FY13. We forecast group margin decline by 110bp [basis points] for FY11 and by 10bp for FY12," Nomura said.The broker keeps its "buy" recommendation and target price of 220p.RBS expects Schroders to report another strong result for 2010, and given its undemanding valuation and strong balance sheet, the broker says that the fund manager remains a key 'buy'.For the year ended 31 December, RBS forecasts a revenue of £1.15bn compared with £0.75bn in 2009, and an operating profit of £391m, up 106% year-on-year. Funds under management are expected to be up 6.2% since September.Due to modest earnings per share upgrades, the broker increases its target price from 1,836p to 2,100p, implying a 2011 "cash-adjusted price-to-earnings multiple of 15, which is what we regard as the mid-cycle margin for the asset management sector."RBS highlights three key reasons for its positive stance on the stock: 1) its organic annualised fund flows "vastly superior to the sector average"; 2) its strong balance sheet "with free cash of £718m"; and 3) an undemanding valuation "of 12.8 times 2011 forecasted earnings below the mid-cycle sector average of 15 times".Despite revising Unilever's near-term estimates down, Charles Stanley has maintained its medium-term forecasts because it has faith in the company's ability to weather very challenging operating conditions over the next two years.The Anglo-Dutch food and households goods giant reported an organic sales growth over 2010 of 4.1% with group sales of €44.2bn being exactly in line with expectations.However, the broker says that the operating environment remains extremely tough in 2011 and its performance "is likely to be out of the company's hands in the context of rising input costs, intense competition and severe pressure on consumers' available spending power.""Nonetheless, we are increasingly convinced that the Unilever turn-around is in place and that continued careful stewardship will prove rewarding for shareholders over the medium term." The broker maintains its 'accumulate' position on the shares.