Broker Round-up Part 1: EasyJet, Weir Group, G4S, Hochschild Mining and FresnilloReported by Proactive Investors on Thursday, 10 May 2012 (on May 10, 2012)
Morgan Stanley has highlighted easyJet (LON:EZJ) as a good investment opportunity given its structural growth and solid earnings per share.
At 7.7 times earnings for this year, the broker sees easyJet as “cheap”, while it says market share gains in business and leisure markets offers an opportunity for a re-rating.
However, analyst Penelope Butcher also notes the risk from airport charge inflation, including a rise of around 40 per cent at Madrid and Barcelona.
The broker remains a ‘buyer’ with an increased price target of 600 pence, up 40 pence against the current price of 523 pence.
The long-term prospects for engineering company Weir Group (LON:WEIR) outweigh the near-term headwinds, according to analysts at Goldman Sachs.
The broker reduced its target price for the company to 2,920 pence from 2,960 pence following disappointing first quarter results but retains its ‘conviction list buy’ stance on the stock.
The Scottish company’s mineral and industrial businesses reported strong trading in the first quarter, but the firm also announced a 26 per cent plunge in sales in the company’s oil and gas division, due to a fall in demand for fracking equipment as natural gas prices continue to drop.
However, Goldman analysts believe that near-term volume declines can be offset through supply management, efficiency gains and the impact of new products.
“We believe the longer-term growth and returns potential in Weir's O&G business remains highly attractive despite the near-term headwinds resulting from industry transition from gas drilling to oil and liquids-rich,” the broker said.
Shares dropped to 1,514 pence yesterday following the results announcement.
G4S (LON:GFS), the official security provider for the London 2012 Olympics, has been upgraded to ‘outperform’ from ‘neutral’ by Credit Suisse.
The broker expects organic growth to accelerate to 9 per cent in 2012, up from 5 per cent last year, due to new contracts in the UK and North America and improved growth from cash solutions.
The Swiss bank said: “We think that 10x 2013E PE and a 3.9% 2013E dividend yield do not reflect either the growth potential or the resilience of the business.”
The broker also raised its target price by 10 pence to 310 pence against the current price of 264 pence, up marginally this morning.
Silver and gold company Hochschild Mining (LON:HOC) is now on Citigroup’s ‘sell’ list after being downgraded from ‘neutral’ as a result of falling silver production levels.
The broker also reduced its target price by 92 pence to 402 pence, while the current price is down 1 per cent today to 433 pence.
Citi analyst Jon H Bergtheil said: “The result of this flat production and sharply rising cost profile (Arcata costs/oz up 50% in 2011, Pallacanta up 34%) is that HOCM cannot afford major slippage in the silver price over these stagnant years. The problem is that the silver price is indeed slipping now.”
The broker claims Mexico-based silver producer Fresnillo (LON:FRES) is a better pick, with a “better political geography” and “steady production growth”.
Links: Full news story
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