Sunday share tips: Travis Perkins, Weir Group, Tax Systems

Sunday newspaper share tips, including Travis Perkins in the Sunday Times, Weir Group in the Sunday Telegraph and Tax Systems in the Mail on Sunday

Travis Perkins shares are best avoided, said the Sunday Times' Inside the City column, along with the short-sellers who have more than one in ten of the shares out on loan. Shares in the company are down almost 40% from their summer 2015 zenith, "and it may be some time before there is any meaningful lift".

The builders merchant, which owns the Wickes and Toolstation chains, is very prone to blaming the weather for any dip in performance, like many in its industry. UK weather is all-important for this FTSE 250 group, as it has no international operations to counterbalance any sniffles in the UK. The health of the housing market is key for Travis Perkins, which is another explanation why the first half of the year has not been easy. February's full year figures sent some investors fleeing after a fall in the number of house moves that required repair, maintenance and improvement from builders. "As a result of all this, the company has had to carry out cost-cutting measures, including axing a third of its head-office jobs in May," the column noted.

Interim numbers on Tuesday will give an update that followed indications of a possible slowdown from others in similar markets, such as Howdens Joinery's results, though planned stores closures at Homebase could be a boon. For the second quarter of the year, like-for-like sales are forecast to increase 3.8%, an improvement on 3% in the first quarter.

Shares in Weir Group were a 'buy' for Questor in the Sunday Telegraph. The company provides conveyor belts and crushers to the world's miners and in June completed the $1.3bn acquisition of US-based Esco, the market leading maker of extraction equipment and other 'ground engagement tools'. Weir simultaneously put its low-margin flow control division on the block, which has hitherto accounted for a sixth of group revenues. A sale could generate £250m in time.

"It is an opportune point in the cycle to be expanding," said Questor, pointing to predictions that the mining sector needs to bump up capital expenditure for many a year. UBS forecasts 18% compound annual growth of Weir's underlying earnings for the next five years, up from 8% in its previous model.

Weir's shares have largely tracked sideways for the past year, with the potential from the Esco deal tempered by the tailing off of the US shale oil boom, as a lack of pipeline capacity had led to producers limiting production and deferring new fracking, hitting demand for Weir’s pressure pumps and other kit that makes up around a fifth of group sales. Earnings estimates have been trimmed 4% for 2018 and 2019 but are seen by some analysts as jumping by 2020. Worldwide fracking activity is outpacing the equipment available, which Questor said is "a high-quality problem, arising in the midst of a modern-day gold rush" and shares that trade for 15 times next year's earnings look "undemanding".

Tax Systems was tipped as a 'buy' by Midas in the Mail on Sunday. The company provides software to help large firms navigate increasingly complex demands, with a customer list that includes more than 100 firms in the FTSE 250 index and 19 out of the UK's top 20 accountants. Chief executive Gavin Lyons is determined to expand the firm after buying its from retiring owners in 2016 and listing it on AIM.

In April, the new 'Making Tax Digital' policy comes into force, forcing firms to first file VAT returns online. Tax Systems helps customers collect data, helps them comply with regulations and manage the process so they pay the right amount of tax at the right time. A recent trading update revealed that revenues are expected to be up 14% in the first half of the year, with Lyons confident about full year earnings targets.

For the full year, profits are estimated to grow at least 18% to £5.8m.