In the first full week back after the Christmas period, City analysts have delivered upgrades for Royal Mail Group (LON:RMG).
Barclays Capital has lifted its recommendation to ‘overweight’ from ‘equal weight’, and set a price target of 575p which is some 29% above the current share price of 444p.
Elsewhere, Cantor Fitzgerald says the privatised postal group is now a ‘buy’.
Robin Byde, analyst at Cantor, reckons good progress has been made with cost cutting and that worries over future wage negotiations, pensions costs and regulation are overstated.
“We believe that the strengths and value of the company’s established networks and brands, in the fast changing delivery world, are underappreciated,” he said in a note.
RBC Capital sees a happier new year for BAE Systems as it upgrades the aerospace group, which last had profit warnings, to its ‘top pick’ from ‘outperform’. At the same time the broker set a new price target of 630p, suggesting some 25% upside to the current price of 502p.
In the retail sector, Jefferies International suggested Sainsbury’s (LON:SBRY) move for Argos owner Home Retail (LON:HOME) as either genius or madness.
“Either this is a sign of a lack of confidence in prospects for the core business (exacerbated by the purchase of Argos, generally viewed as a structurally challenged entity) or a positive step in anticipating how the customer journey will develop in a multi-channel world,” analyst James Grzinic said in a note.
He cautioned, at the same time, that it is not easy to make a case for the positive, given the potential amount of leverage and the supermarket’s lack of expertise in this area.
Grzinic, meanwhile, upgrades B&Q owner Kingfisher (LON:KGF) to ‘buy’ and increases the price target to 420p from 350p.
He says the retail group should be a strong performer in 2016, and highlighted improved earnings visibility and better structural margins.
Yesterday’s disappointing sales update from Next (LON:NXT) was met with cut backs to target prices for four City brokers this morning – with SocGen, Citi, Berenberg and Credit Suisse all lowering their numbers.
Cannacord Genuity has downgraded Direct Line Insurance Group (LON:DLG) to ‘hold’ from ‘buy’.
HSBC (LON:HSBA) was downgraded to ‘underweight’ from ‘neutral’ by JP Morgan Cazenove.