With the housing sector’s results season in full swing Goldman Sachs has seized the opportunity to raise target prices pretty much across the board.
Crest Nicholson (LON:CRST), the residential developer focused on the south of England, is the only stock to make it on to Goldman’s ‘conviction buy’ list, with the target price going up from 590p to 790p.
Estate agent Foxtons (LON:FOXT) is upgraded by Goldman Sachs to ‘neutral’ from ‘sell’, with the target price rising to 259p from 221p, but otherwise the only ratings changes are negative ones for Taylor Wimpey and Redrow.
Taylor Wimpey (LON:TW.) is downgraded to ‘neutral’ from ‘buy’, even as the price target is hiked to 235p from 215p, while full-year results from Redrow yesterday have not prevented Goldman from maing the same downgrade for this stock as well, although as with Taylor Wimpey, the price target goes up – to 563p from 494p.
Deutsche Bank, however, has lifted its price target for Redrow (LON:RDW) from 437p to 481p, despite the house builder’s earnings before interest and tax (EBIT) being 3.5% below the German bank’s estimates.
Deutsche lowered its earnings estimates for the current year, based on lower projected completions and flat margins, but forecasts for next year and the year after are shifted 4-12% higher to reflect the new revenue target of the group.
“Redrow continues to target strong growth, driven by increasing active outlets; however, with the strong benefit of London in its pricing tailing off from 2017 we would argue there are alternative growth stories in the sector which offer more sustainable pricing mix as well as either greater stock market liquidity and/or higher dividend yield,” said analysts Glynis Johnson and Priyal Mulji, as they reiterated their ‘hold’ recommendation.
JP Morgan Cazenove’s first take on this morning’s results from Barratt Developments (LON:BDEV) is that consensus earnings forecasts are unlikely to change as a result of anything revealed in the full-year figures.
Guidance on expected completions for the current year is within the ball park of Cazenove’s expectations, albeit with joint venture operations providing a larger slice.
“We see value in the stock, even if 2015-2018 represents a period of exceptional returns that decline afterwards towards historical levels,” Cazenove said, as it kept its ‘overweight’ recommendation.
In the pharmaceuticals sector, there has been disappointing news for GlaxoSmithKline (LON:GSK) and its Breo drug.
The SUMMIT (Study to Understand Mortality and MorbidITy ) chronic obstructive pulmonary disease (COPD) results were inconclusive in terms of proving any significant cardiovascular benefit.
Citigroup said the verdict “removes a call option from the stock” but notes that expectations for Breo were not high, so the share price impact is likely to be modest.
Citi sticks with its ‘neutral’ rating for Glaxo, and directs its clients to its preferred picks in the sector, namely Novartis, AstraZeneca (LON:AZN) and Bayer.
Lastly, US broker Jefferies has been sky-gazing, and sizing up the prospect of the satellite operators Avanti Communications (LON:AVN) and Inmarsat (LON:ISAT).
The former remains the highest risk/return story in Jefferies’ view, and is rated a ‘buy’, with a price target of 285p, up from 270p. Inmarsat, however, is the top pick in the sector and sees its price target boosted to 1,150p from 1,050p.
In general, Jefferies is bullish on the sector.
“The operators' prioritisation of innovation should see them capitalise on the opportunities and sidestep the challenges: conditions remain good for the orderly monetisation of capacity,” the broker opined.