Investors in Admiral (LON:ADM) got whiplash as a downgrade by Citi put the motor and home insurance group among the morning’s biggest losers in the FTSE 100.
The insurer was demoted to ‘sell’ from ‘neutral’, with a 1335p price (current price 1400p).
Admiral’s dividend could be under threat if the sector remains competitive, according to Citi analyst Kathy Fear, who prefers rivals eSure (LON:ESUR) and Direct Line (LON:DLGD).
Fear says UK non-life insurers have been the top performers in the broader insurance sector due to defensive balance sheets and robust payments to shareholders.
The analyst says she remains a ‘buyer’ of eSure and Direct Line, and today upgrades the targets for both up to 290p (from 255p) and 355p (from 325p) respectively.
Elsewhere, there is salt for the wounds of Elementis (LON:ELM) as JP Morgan Cazenove and UBS both downgraded the chemicals firm in the wake of Wednesday’s profit warning.
Elementis comes off the bullish list for both investment banks, which both moving to a ‘neutral’ rating. The oil price collapse was among the issues blamed by Elementis as it flagged profits would be lower than prior expectations.
Martin Evans, analyst at JP Morgan, says the ‘end market pressures’ may be cyclical rather than structural.
“While this is of little comfort to investors who had become inured to consistent growth from the restructured Elementis, it suggests that the scope for a trading recovery remains further down the line,” Evans said in a note.
“Our downgrade to neutral reflects the likelihood of a period of relative weakness as the market awaits signs of a more stable trading environment.”
Nomura weighed in with a pair of the day’s very few notable upgrades, and both were in the oil services category.
Lamprell (LON:LAM) and Petrofac (LON:PFC) were lifted to ‘buy’, with price targets raised to 200p (from 125p) and 1,130p (from 765p) respectively.
Following meetings in the Middle East Nomura’s analysts reckon US$60 crude represents a “happy medium” and this is good news for the services sector, particularly Lamprell and Petrofac, which are comparatively well placed in the region.
Analyst Christyan Malek, at the same time, expects there will be steady capital spending in the region.
“A strong desire by Saudi Arabia, Iraq, Kuwait and the United Arab Emirates (UAE) to raise production capacity in the medium term should drive incremental spend in new green-field projects and the enhancement of brown-fields,” he said in a note.
Malek forecasts projects worth US$25bn are likely to be awarded in 2015, with US$48bn possible next year. In all, there is some US$103bn of projects ‘on the horizon’, he says.
Deutsche Bank has upgraded Shell (LON:RDSB) to ‘buy’ from ‘hold’ with a target price of 2,425p.
“The Shell dividend is sustainable; the BG transaction with all its strategic logic will proceed; the restructuring possibilities at Shell assuming its completion are substantial and management intent to reshape Shell ‘legacy’ is decided.”
On a 6.3% dividend yield they trade at a level from which we see limited relative or, indeed, absolute downside. Buy, though BG (Buy 1,460p) is a better way in.
Cantor Fitzgerald has stuck with its ‘buy’ rating on Rambler Metals & Mining (LON:RMM) after a meeting with the management.
Key messages were that the headline numbers from the pre-feasibility study on the lower footwall zone at the Ming mine should be published in the coming weeks.
Even with the relatively conservative initial approach being planned, the development should have a "game changing" impact with the Ming mine's life increasing from around five years currently to between 10-15 years.
The target price is 46p.
Investec has upgraded its earnings per share forecasts for defence and tech group Cohort (LON:CHRT) by 4.8% and 3.8% for the current fiscal year and next, respectively, after results today, while the balance sheet strength has encouraged the broker to up its dividend forecast for the current year to 6.0p; it has pencilled in rises of a penny a year in the total dividend for the next three years.
Cohort shares currently trade at just under 280p, up 5.8% on the day. Buy said the broker.