The Expert View: Burberry, RBS and BP

We’ve chosen some of the best comment from analysts to give you their views on Burberry, RBS, BP, SuperGroup, Kingfisher and Greggs.

Key stats
Market capitalisation	£4,900m
No. of shares out	440m
No. of shares floating	434m
No. of common shareholders	not stated
No. of employees	7991
Trading volume (10 day avg.)	2m
Turnover	£1,857m
Profit before tax	£264m
Earnings per share	59.33p
Cashflow per share	79.43p
Cash per share	124.65p

*Correct as at 11 Sep 2012

Seymour Pierce downgrades Burberry as shares crash

Kate Calvert, analyst at Seymour Pierce, has downgraded Burberry (BRBY.L) from 'buy' to 'hold' after the luxury goods group issued a profit warning amid a slowdown in sales.

Retail sales in the second quarter rose 6%, but cutting out the effect of new store openings reduces this figure to zero, and the statement warned that there's been a 'deceleration in recent weeks'. The group expects pre-tax profit for the year to come in 'around the lower end of market expectations'.

Calvert said the group is freezing headcount and travel, cutting marketing spending, and deferring IT projects. 'It is also sensibly accelerating and bringing forward some of October statement pieces into stores early so as to capitalise on the footfall,' she said.

Although she said today's share-price decline is disproportionate, Calvert has opted to downgrade as the lack of visibility on the demand picture will hurt sentiment in the short term.

Over at Charles Stanley, analyst Sam Hart also downgraded Burberry to 'hold'.

Shares in the group closed at £10.88 on Tuesday, down 287p or 20.87%.

Key stats
Market capitalisation	£146,876m
No. of shares out	57,017m
No. of shares floating	52,526m
No. of common shareholders	not stated
No. of employees	142800
Trading volume (10 day avg.)	12m
Turnover	£21,410m
Profit before tax	£-2,044m
Earnings per share	-18.89p
Cashflow per share	-1.30p
Cash per share	139.26p

*Correct as at 11 Sep 2012

JP Morgan: pick Royal Bank of Scotland over Lloyds

Raul Sinha, analyst at JP Morgan, says Royal Bank of Scotland (RBS.L) shares offer better value than those in Lloyds (LLOY.L).

Sinha recently met RBS chief executive Stephen Hester, and was reassured about the direction of the bank: 'Following our meeting, we believe the group continues to take the right actions in terms of balance sheet deleveraging to build up capital.'

Fines relating to Libor manipulation remain a threat, Sinha said, although he expects them to be 'manageable' in size. 'PPI redress costs are also a concern and our sense remains that there may be more to go for the sector on this issue,' he added.

Although Sinha is not negative on Lloyds, he said RBS currenly looks to be better value, trading at 0.6x core 2013 tangible net asset value, compared with Lloyds on 0.8x.

Shares in the group closed at 264.7p on Tuesday, up 11.7p or 4.62%.

Key stats
Market capitalisation	£83,568m
No. of shares out	19,035m
No. of shares floating	17,135m
No. of common shareholders	not stated
No. of employees	83400
Trading volume (10 day avg.)	23m
Turnover	241,462m USD
Profit before tax	16,056m USD
Earnings per share	0.84 USD
Cashflow per share	1.25 USD
Cash per share	0.48 USD

*Correct as at 11 Sep 2012

Nomura lifts BP's target price on asset sale

Theepan Jothilingam, analyst at Nomura, has increased his target price for BP (BP.L) on news that it is to sell oil and gas fields in the Gulf of Mexico to help cover the costs of the 2010 Deepwater Horizon disaster.

BP is selling the fields to Plains Exploration and Production for $5.5 billion (£3.4 billion). The analyst noted that of BP's $38 billion disposal target, $32 billion has so far been realised, and a third of this has come from North America. The disposal is part of the group's 'shrink to grow' plan, which focuses on the disposal of mature assets in favour of bigger, more profitable prospects.

'It’s evident BP has looked to reduce its exposure in the US, reducing operational risk particularly around midstream and downstream assets and prioritising on scale and returns in the upstream,' he said.

Jothilingam's target price has increased from 450p to 455p, reflecting his $4 billion valuation of the assets sold. The analyst retains a 'neutral' valuation on the shares.

Shares in the group closed at 443p on Tuesday, up 5.2p or 1.19%.

Key stats
Market capitalisation	£462m
No. of shares out	80m
No. of shares floating	27m
No. of common shareholders	not stated
No. of employees	1774
Trading volume (10 day avg.)	0m
Turnover	£314m
Profit before tax	£36m
Earnings per share	44.68p
Cashflow per share	61.02p
Cash per share	38.51p

*Correct as at 11 Sep 2012

Canaccord bumps up target price for SuperGroup

Wayne Brown, analyst at Canaccord, has increased his target price for clothing retailer SuperGroup (SGP.L) following what he called a 'very strong' first-quarter update.

UK sales over the quarter rose 1.7% year-on-year, with strong sales of jackets, gilets and sweatshirts amid the wet weather.

'We are today increasing our forecasts to in-line with consensus as a result of both UK retail and wholesale ahead of our prudent assumptions,' Brown said. 'Against what has been a strong start to the year, suggests that our forecasts may still be too light and forecast risk remains firmly on the upside.' Brown's target price rises 70% to 850p.

Even though the shares have gained 21% over the past month the analyst expects momentum to continue, and he cited possible re-entry into the FTSE 250 as an additional positive.

Shares in the group closed at 560.87p on Tuesday, up 29.87p or 8.72%.

Key stats
Market capitalisation	£6,523m
No. of shares out	2,369m
No. of shares floating	2,316m
No. of common shareholders	not stated
No. of employees	67386
Trading volume (10 day avg.)	7m
Turnover	£10,831m
Profit before tax	£640m
Earnings per share	26.95p
Cashflow per share	37.90p
Cash per share	24.78p

*Correct as at 11 Sep 2012

Deutsche Bank downgrades Kingfisher

Rod Whitehead, analyst at Deutsche Bank, has downgraded DIY group Kingfisher (KGF.L) from 'buy' to 'hold' following a rally in the shares over the past year and a darkening economic outlook.

Although Whitehead expects earnings per share to rise 5% in each of the coming five years as a result of sourcing gains, he said the economic backdrop would hold the company back.

'The other key ingredient to our buy case has always been eventual cyclical recovery in DIY, which our forecasts assume from H2 in the UK, and from 2013/14 in France. Recent data suggests neither may happen, which reduces our conviction,' he said.

Based on this weaker outlook Whitehead has increased the discount on his discounted cash flow model from 10% to 15%, which pulls his target price down from 340p to 315p.

Shares in the group closed at 272.3p on Tuesday, down 9.4p or 3.34%.

Key stats
Market capitalisation	£492m
No. of shares out	101m
No. of shares floating	88m
No. of common shareholders	not stated
No. of employees	19504
Trading volume (10 day avg.)	0m
Turnover	£701m
Profit before tax	£45m
Earnings per share	44.29p
Cashflow per share	75.00p
Cash per share	19.78p

*Correct as at 11 Sep 2012

Oriel says 'sell' Greggs as pork prices rise

Jonathan Pritchard, analyst at Oriel, has reiterated his 'sell' stance on Greggs (GRG.L) amid concerns about the rising price of pork – a key ingredient for the sausage-roll seller.

The analyst cited an article in yesterday's Financial Times suggesting that pig production is becoming increasingly uneconomic. Droughts in the US have caused the price of feed to rocket and new EU regulations will make life harder for pig farmers from January.

Many pig farmers are giving up the industry, according to the article, which will lead to price inflation.

'The customer hardly has loads of spare cash at the moment anyway and the binary relationship between inflation and volumes will persist for the food retailers,' Pritchard said. 'That’s bad news for Greggs, which obviously has a disproportionate reliance on pork products. Earnings growth will be very pedestrian here, which doesn’t justify the premium to the sector and the market.'

Shares in the group closed at 490.6p on Tuesday, up 3.9p or 0.8%.