Broker tips: Dalata Hotel Group, EasyJet, Royal Dutch Shell

Analysts at Berenberg reiterated their 'buy' rating on hotel operator Dalata Hotel Group on Tuesday, praising the group for its "strong performance" under "tough conditions".

After Dalata announced a healthy set of interim results, with double-digit growth in both revenue and underlying earnings, despite its core markets being weak, Berenberg said the firm's performance demonstrated the benefits of the company's differentiated business model and diverse customer mix.

Although Dalata's like-for-like revenue per available room was down 0.5% in Dublin and increased by just 0.3% in regional Ireland, the German broker noted that those figures were still better than those for the sector as a whole, as the Dublin market declined 1.4%, while RevPAR in Cork and Galway "dropped considerably".

And while trading in those markets had remained subdued during July and August, which Berenberg noted would have an impact on Dalata's trading since the half-year ended, the outlook for the balance of the year was "positive", leading its analysts to anticipate a full-year performance similar to that of the first half.

"As such, we remain confident in Dalata's medium-term expansion plans and believe its growth potential is being significantly underappreciated at the current share price," added Berenberg, which also stood by its 700p target price for the group's shares.

Berenberg also pointed to Dalata's strong balance sheet and significant medium-term expansion plans as reasons to remain positive on the group.

Kepler Cheuvreux downgraded its rating on EasyJet shares to 'reduce' from 'hold' on Tuesday, slashing the price target to 820p from 1,200p as it cut its FY2020 estimates and suggested the airline could be an acquisition target.

Kepler pointed to less capacity growth and uncertainty on demand, as it noted data from Diio, which showed that Easyjet's seat capacity will only rise 2.3% year-over-year in the first quarter of 2020. As a result, it revised its capacity growth expectations from +5% to only +3% for 2020 as a whole.

"EasyJet’s main market is the UK, where demand might be impacted by Brexit in FY 2020E; at this stage we keep seat unit revenues flat YOY for FY 2020E, but we see more risks to this assumption.

"From discussions with the company, we understand that due to Brexit, the FY 2020E outlook will only be published along with full-year results in mid-November (rather than at the trading update at the beginning of October)."

Based on the performance of EZJ so far this year and its guidance, Kepler adjusted its pre-tax profit estimate for 2019 to £446m, which is slightly above EasyJet's guidance of between £400m and £440m and 6% higher than Reuters consensus. Kepler's new assumptions for FY 2020 result in a pre-tax profit decline of more than 20% to £350m, which is 24% below Reuters consensus.

"While we think EasyJet could be an acquisition target once the consequences of Brexit and EasyJet’s contingency plans have been tested, until then we believe the stock will trade based on the company’s profitability."

Analysts at Barclays downgraded their recommendation on shares of Royal Dutch Shell even as they kicked off coverage of the biggest US oil names at 'overweight'.

In a research note sent to clients, the broker said that in the latest edition of its Oil & Gas Benchmarks, it had downgraded its view on Shell from 'overweight' to 'equalweight' with Total replacing it as its 'top pick' in Europe.

Its view on the industry was unchanged at 'positive'.