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The Expert View: Persimmon, Pearson and Centrica

A round-up of analyst notes, including their take on Moneysupermarket.com and Andor Technology.

by Harry Brooks on Feb 29, 2012 at 05:01

We’ve rounded up some of the best comment from top analysts to give you their views on Persimmon, Pearson, Centrica, Moneysupermarket.com and Andor Technology.

Key stats
Market capitalisation£2,123m
No. of shares out301m
No. of shares floating283m
No. of common shareholdersnot stated
No. of employees2414
Trading volume (10 day avg.)1m
Turnover£1,570m
Profit before tax£115m
Earnings per share38.07p
Cashflow per share39.65p
Cash per share42.10p

*Correct as at 28 Feb 2012

Oriel cheers on Persimmon as dividend jumps

Anthony Codling, analyst at Oriel Securities, has retained his 'buy' recommendation on Persimmon (PSN.L) after the housebuilder unveiled plans to return £1.9 billion of surplus cash to shareholders.

'As we arrived at our desks this morning,' Codling said, 'we were considering a move away from our buy recommendation, however a planned return of 620p over 10 years suggests a current annualised yield of almost 10%'.

Persimmon rocketed up 113p, or 18%, to 740p during Tuesday trading after it said it would hand over the money via dividends over nine and a half years, starting from 2013, throughout which time it would remain largely debt-free.

The group's actual results were broadly in line with expectations, Codling said, with underlying profits before tax rising 55% to £148.1 million. However, these figures were something of a side show in the context of the bumper dividend pay-out.

Shares in the group closed at 707p on Tuesday, up 80p or 12.76%.

Key stats
Market capitalisation£9,648m
No. of shares out814m
No. of shares floating786m
No. of common shareholdersnot stated
No. of employees36317
Trading volume (10 day avg.)2m
Turnover£5,663m
Profit before tax£521m
Earnings per share64.88p
Cashflow per share92.78p
Cash per share215.09p

*Correct as at 28 Feb 2012

Liberum Capital downgrades Pearson as margins come under pressure

Ian Whittaker, analyst at Liberum Capital, has downgraded educational publishing company Pearson (PSON.L) to 'sell' as he believes the structural risks he identified back in October are starting to have a visible impact on the group.

In North America concerns over the high cost of textbooks are 'fuelling the development of new business models, such as book rentals and open source', the analyst said. Underlying revenues in the region fell by 1% in 2011, which is a worry as US higher education accounts for an estimated 30% of group profit.

Net profits over the year declined by 26% to £957 million, although the previous year's figure was distorted by the sale of its stake in Interactive Data Corp.

Whittaker said that addressing the structural problems would take investment, which is likely to stifle margin improvement and earnings growth. He also cautioned that the group's international markets could not be relied upon to offset the gloomy US picture: 'Sub-Saharan Africa’s weak performance in 2011 demonstrates emerging markets do not necessarily equal high growth.'

Shares in the group closed at £12 on Tuesday, down 4p or 0.33%.

Pearson is a Citywire Top Stock held by Nigel Thomas in his AXA Framlington UK Select Opportunities fund.

Key stats
Market capitalisation£15,533m
No. of shares out5,173m
No. of shares floating4,929m
No. of common shareholdersnot stated
No. of employees34969
Trading volume (10 day avg.)11m
Turnover£22,824m
Profit before tax£442m
Earnings per share8.50p
Cashflow per share31.46p
Cash per share10.55p

*Correct as at 28 Feb 2012

Standard & Poor's upgrades Centrica's target price on promising outlook

Clive Roberts, analyst at Standard & Poor's, has increased his target price for Windsor-headquartered utility company Centrica (CNA.L) based on the group's encouraging forecasts for the year ahead.

The group is predicting higher profits from its upstream oil and gas business in 2012, and it expects production in the UK to rise by more than 25% this year, having recently acquired a number of North Sea assets.

As well as higher profits from oil and gas production, the group plans to save £500 million in costs over the next two years through measures including a 10% cut in British Gas costs, axing 2,300 jobs and a pay freeze.

Shares in the group, for which Roberts has a target price of 423p, closed at 300.40p on Tuesday, up 3p or 1.01%.

Key stats
Market capitalisation£657m
No. of shares out509m
No. of shares floating238m
No. of common shareholdersnot stated
No. of employees433
Trading volume (10 day avg.)0m
Turnover£149m
Profit before tax£8m
Earnings per share1.48p
Cashflow per share7.05p
Cash per share7.19p

*Correct as at 28 Feb 2012

Peel Hunt downgrades Moneysupermarket.com on margin concerns

Malcolm Morgan, analyst at Peel Hunt, has downgraded price-comparison website Moneysupermarket.com (MONY.L) to 'hold' from 'buy' despite 2011 results that were in line with expectations and news that revenues are running ahead of expectations in the year so far.

According to the group's annual report for the year ended 31 December, revenues hit £178.5 million, up 20% on the previous year and slightly above consensus estimates. Profit before tax rose 26% to £51.7 million.

Earnings in the year to date are up 15%, according to the group's statement, a result of squeezed consumers using the site to switch their credit cards and insurance providers and a new TV advertising campaign.

Nonetheless, Morgan opted to downgrade the group as he said margin growth remains elusive: 'Revenue so far this year is running better than our model assumes, but earnings before interest, taxes, depreciation and amortisation is in line: so room for some top-line improvement, but on level rather than rising margins.'

Shares in the group closed at 128.90p on Tuesday, up 7.30p or 6%.

Key stats
Market capitalisation£169m
No. of shares out31m
No. of shares floating26m
No. of common shareholdersnot stated
No. of employees319
Trading volume (10 day avg.)0m
Turnover£57m
Profit before tax£7m
Earnings per share19.98p
Cashflow per share26.84p
Cash per share46.49p

*Correct as at 28 Feb 2012

FinnCap lifts Andor Technology's target price ahead of factory visit

David Buxton, analyst at FinnCap, has lifted his target price for scientific digital camera maker Andor Technology (AND.L) ahead of a capital markets day at the company's factory that he says will rekindle interest in the group.

The analyst noted that according to statements made at the latest AGM, trading in the first four months of the financial year has been in line with expectations. Sales in Asia Pacific markets are continuing to rise, and European markets are performing well, Buxton said.

'The trading update was positive. We look to the forthcoming factory visit to refocus investors attention on Andor's growth attributes, with presentations on the new product pipeline and market dynamics, in addition to seeing progress on the recent expansion of factory capacity, which facilitates planned increases in output,' Buxton said.

Shares in the group, for which Buxton now has a target price of 630p, up from 615p previously, closed at 548.50p on Tuesday, down 5.5p or 0.99%.

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  • Moneysupermarket Com Group PLC (MONY.L)
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  • Andor Technology PLC (ANTE.L)
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  • Pearson PLC (PSON.L)
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  • Persimmon PLC (PSN.L)
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  • Centrica PLC (CNA.L)
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