Broker tips: Wolseley, Severn Trent, Hunting

Canaccord Genuity hiked its target on Wolseley ahead of the builders merchant's first quarter update.

All eyes would be on its performance in the US, the broker believed.

Nonetheless, while trading in the first three months of the year would benefit from its exposure to the States, analysts Aynsley Lammin and Matthew Walker advised clients not to expect any significant incremental improvement in underlying trading in the US.

In that same vein, other parts of the group had likely continued to face challenging conditions and a focus on acquisitions limited the margin for any capital returns this year, the analysts said in a research note dated 23 November.

Even so, Canaccord lifted its target on the stock from 4,320p to 4,600p mainly as a result of currency adjustments´ positive impact on the firm´s earnings per share.

HSBC raised its target price on Severnt Trent and stuck to its 'hold' recommendation due to the attractions of its 'defensive' nature.

That was despite the fact that Severn Trent had been the strongest performer of its UK regulated peers in 2016, with its shares rising by 20% versus the MSCI Utilities index.

Among the company´s strong points, HSBC highlighted the predictability of its dividend, which was set at 81.5p for 2016/2017 with annual dividend growth thereafter of at least RPI until March 2020.

Hunting surged as Credit Suisse upped its stance on the stock to ‘outperform’ from ‘neutral’ and lifted the price target to 575p from 500p saying the company is turning a corner.

CS said that with greater exposure to well completions and US unconventionals, Hunting should have more operational leverage to this recovery cycle than 2009.

“The recent improvement in orders suggests customers have consumed excess inventories of certain product lines. Rig count (up more than 50% from the bottom across major basins) and drilled but uncompleted completion trends add substance to this thesis, while a Trump administration should also be a boon to the US Oil & Gas Industry. All this suggests a brighter outlook for HTG.”

In addition, the bank pointed out that Hunting has made good progress cutting net working capital and net debt through the downturn.