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The Expert View: ASOS, Tesco and JD Wetherspoon
Our daily round-up of analyst recommendations and commentary, featuring Carnival and Associated British Foods.
by Harry Brooks on Sep 17, 2012 at 05:01
We’ve chosen some of the best comment from analysts to give you their views on ASOS, Tesco, JD Wetherspoon, Carnival and Associated British Foods.
Peel Hunt downgrades ASOS as shares climb
John Stevenson, analyst at Peel Hunt, has downgraded online fashion retailer ASOS (ASC.L) from 'buy' to 'hold' ahead of its fourth-quarter update following a rally in the shares.
ASOS releases its latest set of figures next week, and Stevenson expects year-on-year UK sales growth to rise to 12%. Overseas, he expects international growth of 44.9%, EU growth of 20% and US growth of 65%.
'ASOS remains one of our key long-term structural growth picks in the sector,' Stevenson said. 'We have noted a change in tone from management over the past six to 12 months, with a focus on delivering sustainable, manageable growth, rather than 'hell-for-leather' global expansion.'
However, with the shares up 65% this year having been heavily sold off after a disappointing second-quarter update, Stevenson thinks the upside is limited for now.
Shares in the group closed at £20.69 on Friday, up 49p or 2.43%.
Nomura says Tesco results will show the plan is working
Nick Coulter, analyst at Nomura, has previewed supermarket giant Tesco (TSCO.L)'s first-half results, which will be published on 3 October.
The analyst expects like-for-like sales to have been flat in the second quarter, which will represent progress following a decline of 1.5% in the first quarter.
'We expect much of the update and investor attention to focus on the cumulative impact of the group’s broad-based UK plan. Notably, we believe that initiatives such as Fresh staff, new Bakery, Refresh store capex, the Everyday Value own-brand launch, and an enhanced promotional mix have driven a meaningful volume response,' he said.
'Trading at a price-to-earnings discount to its UK peers and the broader European Food Retail sector, we continue to see clear value.'
Shares in the group closed at 345.3p on Friday, up 3.2p or 0.94%.
Oriel reiterates 'add' on JD Wetherspoon
Jeffrey Harwood, analyst at Oriel Securities, has reiterated his 'add' recommendation on pub chain JD Wetherspoon (JDW.L) following results that came in ahead of expectations.
Revenues over the past year increased 11.7% to £1.2 billion and like-for-like sales rose 3.2%. In the six weeks to 9 September 2012 like-for-like sales increased by 8.4%, helped by strong sales during the Olympic and Paralympic Games.
'Sales this summer have been enhanced by a number of one-off events and we do not expect to sustain this level of growth,' the statement noted.
Harwood, however, was impressed: 'This performance is well ahead of expectations and we expect to upgrade our forecast for 2012/13. While the shares have performed well in recent months, up 20% since the end of May, the rating remains undemanding on cash flowconsiderations given the free cash flow yield of 12%, on the basis of our 2012/13forecasts.'
Shares in the group closed at 479p on Friday, up 18.4p or 3.99%.
Deutsche Bank previews Carnival's third-quarter results
Simon Champion, analyst at Deutsche Bank, has reiterated his 'buy' recommendation on cruise line operator Carnival (CCL.L) ahead of its third-quarter trading update on the 25th of this month.
Champion expects Carnival to just about hold 2012 earnings per share guidance within the 180-190 cents range in spite of the rising oil price. His forecast falls from 191 cents to 182 cents in anticipation of a higher fuel price in the last quarter.
'The group should have been well booked for its important Q3 season at the time of the last results and so we believe investor’s focus on trading may be on any hints at 2013 trading outlook,' he added.
His target price falls from £24.50 to £24, largely a reflection of recent dollar weakness.
Shares in the group closed at £22.81 on Friday, up 31p or 1.38%.
Investec trims forecasts for Associated British Foods
Martin Deboo, analyst at Investec, has cut his earnings per share (EPS) forecast for Associated British Foods (ABF.L) based on the poor outlook for the group's ingredients and groceries divisions.
'We downgrade forecasts for the first time in a while. Primark, Sugars and Agriculture increase a tad,' he said, trimming his 2013 EPS forecast about 2% to 90.2p. 'But this is more than offset by insipid ingredients and grocery, where competition in yeasts and ABF’s Australian meat imbroglio are the salient factors.'
Deboo noted that Primark continues to do well as customers tighten their belts, with like-for-like sales expected to be up 3% over the year. However, the analyst said the strength of this division is reflected in the shares, for which he has a target price of £13. He retains a 'hold' recommendation.
Shares in the group closed at £12.75 on Friday, up 12p or 0.93%.
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Look up the shares
- Carnival PLC (CCL.L)
- Tesco PLC (TSCO.L)
- J D Wetherspoon PLC (JDW.L)
- Asos Plc (ASOS.L)
- Associated British Foods PLC (ABF.L)