Broker tips: Diageo, Relx, Biffa, Aston Martin Lagonda
Analysts at Barclays raised their estimates for Diageo's first half sales and profits, saying that they underestimated the company's potential.
In turn, Barclays also raised its target price for the stock from 4,440.0p to 4,700.0p, while keeping its recommendation for the stock at 'overweight'.
Following the drinks giant's capital markets day, where it upgraded its guidance for organic sales growth for fiscal years 2023-25 to a range of 6.0 to 9.0%, Barclays said Diageo's new forecasts were "significant" but still thinks the firm underestimates its potential here.
The analysts' own estimates for the half called for OSG growth of 18.1% and an EBIT increase of 19.3%, while for the full-year, they were at 15.6% and 19.1%, respectively.
Barclays also upped its estimates for Diageo's EBIT growth across fiscal years 2023-25 to a range of 9.0 to 11.0%, which was ahead of the company's guidance.
Analysts at Berenberg raised their target price on publishing company Relx from 1,816.0p to 2,300.0p on Thursday, stating its sum of the parts assessment suggested the stock's current share price was "fair".
Berenberg stated that while bond yields had increased to reflect rising inflation and the expectation of rate hikes, the equity markets, and Relx in particular, had shrugged off what it considers to be the main issue for the company as regards valuation.
The German bank stated that with no "obvious catalyst" to the downside for either Relx or rival Wolters Kluwer it opted to hike its target price for the stock to reflect an assumption of higher bond yields, an estimate based on both a sum of the parts and a discounted cash flow assessment.
Berenberg also updated its group estimates to reflect the latest foreign exchange rates, and Relx's nine-month trading update, which showed it was "on track" to deliver strong results for 2021, despite the fact that exhibitions were unlikely to make much of a contribution, if any, to profits in the current year.
When compared to Wolters Kluwer, the analysts highlighted that the 'hold' rated Relx was "clearly still at a discount" given that its earnings included no contribution from exhibitions.
Broker Peel Hunt downgraded its stance on shares of waste management company Biffa to 'hold' from 'add' on Thursday and cut the price target to 395.0p from 430.0p after the interim results.
Peel said the results were in line overall but the performance of Company Shop Group has disappointed.
"The big disappointment is the Company Shop, bought earlier this year for £88m, which is seeing reduced footfall, and the company is taking an impairment charge of £25.0m," Peel said.
"We make no change to our adjusted profit before tax expectations of £75.0/91.3/103.9m and earnings per share of 18.9/23.0/24.8p for FY22/23/24E," it said.
The broker argued that shares are now up with events, trading at 8.1x FY23E EV/EBITDA.
Analysts at Deutsche Bank reiterated their 'hold' recommendation for shares of Aston Martin Lagonda following a visit to the carmaker's Gaydon headquarters.
During the visit, top management highlighted changes to the company's production setup which the analysts said would "significantly" improve efficiency, while noting how the team on the ground had bought into the plans for change.
"To us, the showcased design studies for the product refresh that is ahead point to a strong model momentum building into 2023 which should support the mid-term financial ambitions," they said.
DB also noted that management was "very positive" on its ability to hit medium-term financial targets with the planned strategic shift said to be "well on track".
"We see Aston Martin clearly moving in the right direction and laying ground for an acceleration to towards 2024/2025.
"That said, we see current trading in shares reflecting the balanced risk/reward in the near term and remain on 'hold'."