Berenberg ups target price on Huntsworth after 'better than expected' first half

Analysts at Berenberg updated their forecasts on Huntsworth following the healthcare and communications group's "better than expected" first half.

Berenberg upped its target price on Huntsworth from 135p to 150p, after having included the firm's acquisition of San Francisco-based healthcare marketing agency Giant Creative Strategy and bumped-up its estimates for the firm's earnings per share in 2018 and 2019 by 5% and 11%, respectively.

The broker noted that despite the group's first-half results being largely in line with expectations, the rapid fall in Huntsworth's share price following their release indicated that it was "worth picking apart the numbers in a little more detail".

After having done so, Berenberg concluded that Huntsworth's figures may have been "slightly better than they appear".

Berenberg said that some of the disappointment seen in Huntsworth's marketing unit was, in its view, a result of the re-segmentation of the group's profit and loss at the end of 2017 and also highlighted the firm's "excellent" divisional margins throughout the year.

The analysts also pointed out that excluding FX and restructuring costs, Huntsworth's results would have "smashed" its earnings per share forecasts by about 11%.

Margins at the company's Marketing and Medical arms were "excellent" too, beating Berenberg's estimates by 220bp and 310bp each. In Communications they had undershot its forecasts by 100bp, but almost completely due to restructuring costs.

"Our 150p price target is roughly in the middle of the more-conservative methods and near the bottom of the straight P/E approach," they said.

"However, with only 15% of annualised group operating profit from non-healthcare activities, we believe that earnings momentum could drive the market to focus on P/E, leaving considerable upside even to our target."