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UBS cuts RELX to ‘sell’, believes earnings acceleration which drove material outperformance over last 3 years “coming to an end”

Following a 17% share price appreciation in the last three months, in part driven by a weaker pound, the Swiss bank has left its target price for RELX unchanged at 1,555p
Publishing
That is below the FTSE 100-listed publisher's current share price of 1,600p, down 3.3% on Wednesday’s close

UBS has put a dampener on shares in RELX PLC (LON:REL), downgrading its rating for the Anglo-Dutch publishing group to ‘sell’ from ‘neutral’ as they believe “an earnings acceleration which drove material outperformance over the last 3yrs is coming to an end”.

Following a 17% share price appreciation in the last three months, in part driven by a weaker pound, the Swiss bank has left its target price for the FTSE 100-listed firm unchanged at 1,555p, which is below the current share price of 1,600p, down 3.3% on Wednesday’s close.

READ: RELX issues "steady as she goes" AGM statement

In a note to clients, UBS’s analysts noted three reasons for their downgrade: “1) we forecast underlying earnings growth to decelerate from +6% in 2017 to +5% in FY18-21, 2) we see increasing structural risk to RELX's Journal business (c20% of group revs, 55% of STM); and 3) we believe RELX's valuation is full on 19x FY19E EPS with risks now firmly skewed to the downside. “

They added: “Our upside/downside spectrum shows only 6% upside with 28% downside. Further, marking RELX's divisions to listed peers suggests the stock is 7% overvalued at current prices.”

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