It’s another downbeat day for the double-R as the City had salt for investor wounds.
In the wake of Monday’s profit warning Rolls Royce (LON:RR.) shed a further 3.3% (it has now fallen 11%) and JP Morgan Cazenove was among those cutting this morning.
The American broker’s London office reduces RR to ‘underweight’, and slices the price target to 640p from 900p.
“We feel somewhat nervous that the shares were only down 6% (yesterday) on such a big profit warning,” said JP Morgan analyst David Perry.
He added: “Over the next 3-4 years RR will be in a major transition phase, with falling sales of mature high margin aero engines and rising sales of new, loss-making engines,”
“We believe that investors wanting to buy into the long-term story can afford to wait for a better entry point.”
RBC Capital is sticking with a ‘sector perform’ rating, but has reduced its target to 850p from 1,060p.
“Assuming that new management has 'kitchen sinked' the forecast, we would expect limited downside to estimates from here,” RBC analyst Robert Stollard said in a note. “However, it's hard to see much upside in 2016–17.”
Elsewhere, RBC has also begun covering Savannah Petroleum (LON:SAVP) with the premise that the ambitious African oil junior has a good ‘second-mover’ advantage.
The Canadian investment bank gives the AIM quoted group a ‘buy’ recommendation and a 100p price target, which implies some 150% upside to the current price of around 40p.
“Savannah Petroleum offers the upside potential of a 'basin opening' explorer, but with less frontier risk. The company plans to drill in Niger's under-explored Agadem Basin, which is being opened up (geologically and commercially) by CNPC,” analyst Al Stanton said.
Cannacord Genuity has cut its price target for Marks & Spencer (LON:MKS) following today’s trading update, which analyst David Jeary describes as “broadly in line with market expectations.” The price target cut, to 585p from 620p, accounts for recent market weakness, he explained in a note.
Lloyds Banking Group (LON:LLOY), meanwhile, is upgraded by Canaccord to ‘buy’ from ‘hold’ whilst the target moves to 100p from 70p.
UBS upgrades Land Securities (LON:LAND) to ‘buy’ and sets a 1425p target partly because recent weakness means the share now trades at a bigger discount to net asset value (after previously being ‘very tight’ to the underlying valuation).
“Investors may be concerned by rising bond yields and that we may be reaching the peak in the cycle, but we think this is misplaced,” UBS analyst Osmaan Malik said. “We view the discount as an opportunity.”
Malik also highlights that rents in the UK are rising, particularly for office space in London.