Pearson (LON:PSON), a business that was once described as 'opaque' by US broker Jefferies, has had some "layers of uncertainty" removed, analysts at Barclays said today following the media and publishing giant's trading update last week.
Barclays points to these four points - that restructuring is known; guidance now factors in the impact on revenues and margins from tough markets in 2016; a flat divi through restructuring, and that the chief executive is driving the plan.
However, the bank still sees "material uncertainty on future growth and its 2018 EBITA is 10% below guidance.
It says it struggles to see the shares as good value, and it has downgraded the target price to 750p from 990p previously. The rating is a repeated 'equalweight'.
Pearson shares rose last week after it warned on profit but maintained the dividend and announced 4,000 job cuts.
It forecast 2016 operating profit and adjusted earnings per share - before restructuring costs - of between £580mln and £620mln and between 50p and 55p, respectively.
Pearson said the jobs shake-up would help it save about £350mln a year, with about £250mln of the savings in 2016 and a further £100mln in 2017.
Also in brokerland on Monday, Japanese broker Nomura is upbeat on cigarette maker British American Tobacco (LON:BATS) and lifts the target price by 9% to 4810p from 4410p, rating shares a 'buy'.
"With transactional headwinds subsiding, strong underlying share development, healthy pricing, self-help continuing and contribution from its 42% holding in Reynolds, we expect FY16 EPS growth of 11%," said analyst David Hayes.
Last summer peer Reynolds closed a US$29.95bn deal to buy Lorillard, an opportunity, which should accelerate its share gains and therefore bolster the value of BATS holding.
Plumbers merchant Wolseley (LON:WOS) has its price target downgraded today by heavyweight Credit Suisse, which however repeats an 'outperform' stance on shares.
The target is wrenched down to 4300p from 4700p.
Another firm to get a target clip is Great Portland Estates (LON:GPOR), which is rated 'hold' by Jefferies but the target is clipped down to 705p from 837p.
Fever Tree (LON:FEVR), the drinks maker, has its target pumped up to 740p a share from 700p previously, after what broker Investec says is "another positive" update.
In a pre-close update, it reported that full-year revenue growth will be in the order of 71%, after second half growth accelerated to 77% against first half growth of 61%.
Investec had been assuming 57% full-year growth in its forecasts. It rates shares a 'buy'.
The same broker repeated a 'sell' on retail giant Kingfisher (LON:KGF) and was not overly impressed after the B&Q owner today unveiled a £600mln cash return to shareholders but said its overhaul would hit profits. It forecast that pre-exceptional reported profit would take a hit, net of operational efficiency benefits, by about £50mln in the first year of its five-year restructuring. Investec said it was an ambitious plan, repeated a sell and put the target price under review.
It sees an equivalent return to shareholers of 5.5% which is insufficient, given the execution risk, it said.
Meanwhile, in smaller caps, shares in Abzena (LON:ABZA) rose over 7% on Monday after it unveiled a tie-up with an unnamed major US biotech worth up US$150mln.
Anzena ges cash every time the American company passes a significant developmental milestone in a deal for Abzena's ThioBridge antibody drug conjugate (ADC) linker. House broker N+1 Singer described it as "excellent" and illustrates the commercial potential of Abzena’s ThioBridge platform for the design of better antibody-drug conjugate drugs. The firm’s technologies and pre-clinical services enable biopharmaceutical companies to produce better and hopefully more efficacious drug candidates, it said. The broker made no changes to estimates, but said clearly the agreement could drive material upgrades to valuation subject to continued successful development.