The Expert View: Hargreaves Lansdown, Tullow Oil and Diageo

Our daily round-up of analyst recommendations and commentary, featuring Hargreaves Lansdown (co-founder Peter Hargreaves is pictured), Tullow Oil, Diageo, SSE and BT Group.

Key stats
Market capitalisation	£3,848m
No. of shares out	474m
No. of shares floating	185m
No. of common shareholders	not stated
No. of employees	657
Trading volume (10 day avg.)	1m
Turnover	£239m
Profit before tax	£113m
Earnings per share	24.06p
Cashflow per share	24.65p
Cash per share	30.49p

*Correct as at 6 Feb 2013

Canaccord upgrades Hargreaves Lansdown to 'buy'

Fund supermarket Hargreaves Lansdown (HL.L)'s strong interim results have spurred Canaccord analyst Robin Savage to upgrade the group to 'buy'.

Half-year results showed a 30% leap in pre-tax profits to £93.7 million on revenues 24% higher at £140.3 million. Assets under administration (AuA) were up 30% to £30.4 billion.

'While 1H13 profit is very close to our forecast, 1H13 revenues is £2 million higher and importantly AuA are £1.5 billionn (ie. 4%) above our expectations and the equity market has been very strong year to date,' Savage said.

Read Citywire's interview with Peter Hargreaves.

Shares in the group closed at 796.5p on Wednesday, up 62p or 8.4%.

Key stats
Market capitalisation	£10,920m
No. of shares out	907m
No. of shares floating	845m
No. of common shareholders	not stated
No. of employees	1548
Trading volume (10 day avg.)	2m
Turnover	1,472m USD
Profit before tax	415m USD
Earnings per share	0.46 USD
Cashflow per share	0.87 USD
Cash per share	0.22 USD

*Correct as at 6 Feb 2013

Production woes offset exploration success for Tullow Oil, Investec says

Investec analyst Brian Gallagher has reiterated his 'sell' recommendation on Tullow Oil (TLW.L) ahead of next Wednesday's annual results.

The analyst said the results aren't likely to contain any real surprises, but should give investors a better idea of what the management plan to do with Ghana's Jubilee oil field, which remains a source of trouble for the group.

'Jubilee’s ramp-up has continued to disappoint and at the update we expect Tullow to focus on debottlenecking plans and a possible 2013 exit rate in excess of 130 million barrels of oil a day,' Gallagher said.

Although the analyst said exploration in Mauritania and Norway could lift Tullow, its involvement in oil production is a big negative as far as he's concerned.

'We continue to view Tullow as increasingly levered to its production business negating the quality of its exploration portfolio. As a result, we reiterate Sell and our £10 sum of the parts-derived target price ahead of the event.'

Shares in the group closed at £12.07 on Wednesday, up 23p or 2%.

Key stats
Market capitalisation	£46,925m
No. of shares out	2,509m
No. of shares floating	2,493m
No. of common shareholders	not stated
No. of employees	27483
Trading volume (10 day avg.)	5m
Turnover	£10,762m
Profit before tax	£1,953m
Earnings per share	77.84p
Cashflow per share	97.05p
Cash per share	42.94p

*Correct as at 6 Feb 2013

JPM bumps up target price for Diageo

Diageo (DGE.L)'s still delivering the goods, according to JP Morgan analyst Matthew Webb, with its strategy of stepping up its exposure to growth markets bearing fruit.

In the six months to the end of December organic sales rose 5% year-on-year, with profits up 9%. This was in line with consensus estimates in terms of sales, and the profit figure was slightly ahead, Webb said.

However, there still are other drinks makers he prefers. 'We continue to prefer the fundamental investment case at SABMiller, Diageo’s main London-listed peer,' he said.

'However, we note that SABM’s recent outperformance (+8% since mid-January versus Diageo +3%) has expanded SABM’s price-to-earnings premium versus Diageo to 11% which some might consider full given what are currently fairly similar profit growth profiles.'

The analyst's target price rises from £17.75 to £19.15.

Shares in the group closed at £18.77 on Wednesday, up 0.6p.

Key stats
Market capitalisation	£13,455m
No. of shares out	958m
No. of shares floating	950m
No. of common shareholders	not stated
No. of employees	19489
Trading volume (10 day avg.)	3m
Turnover	£31,724m
Profit before tax	£198m
Earnings per share	21.06p
Cashflow per share	89.28p
Cash per share	20.03p

*Correct as at 6 Feb 2013

SSE sells wind farms

SSE (SSE.L)'s decision to sell some of its wind farms is a good one, according to Seymour Pierce analyst Angelos Anastasiou, who has a 'hold' recommendation on the shares.

The power firm has agreed to sell four wind farms with a total generation capacity of 79.5MW to a new fund managed by Greencoat Capital for £140 million. As part of the deal SSE will enter into power purchase agreements (PPA) for three of the wind farms and will continue to run and maintain all four facilities.

'The proceeds from these disposals will support our investment in new renewable assets in the coming financial year,' SSE's finance director Gregor Alexander said. Anastasiou agreed that the sale was a good move, although he noted that the money it'll raise isn't much in the context of net debt that he estimates to have hit about £7.2 billion at the end of March.

Shares in the group closed at £14.09 on Wednesday, down 5.4p or 0.4%.

Key stats
Market capitalisation	£21,365m
No. of shares out	7,877m
No. of shares floating	7,852m
No. of common shareholders	not stated
No. of employees	89000
Trading volume (10 day avg.)	19m
Turnover	£18,897m
Profit before tax	£2,002m
Earnings per share	24.41p
Cashflow per share	60.66p
Cash per share	9.76p

*Correct as at 6 Feb 2013

BT's still on track, Berenberg Bank says

Berenberg Bank analyst Stuart Gordon has reiterated his 'buy' recommendation on BT Group (BT.L) and increased his target price on the back of healthy growth and continued cost-cutting.

'BT continues to positively deliver in terms of earnings and earnings per share growth, which sets it aside from the bulk of the other names in the telecoms segment,' Gordon said.

The analyst noted that BT has already identified the next round of cost savings, with more details on the anticipated savings to be announced with the annual results in May. The group continues to gain broadband subscribers, with 122,000 new retail consumers signing up in the latest quarter.

'With this positive momentum leading to some modest upgrades to our numbers, we lift our price target by 20p to 280p and reiterate our Buy recommendation,' he added.

Shares in the group closed at 272.7p on Wednesday, up 3.8p or 1.4%.