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Brokers: BAE Systems gets an upgrade

Deutsche Bank was bullish on the prospects of the defence specialist on Monday, upping its target price for the stock

an RAF jet on a runway with the BAE name in the background
Deutsche Bank says investors will be "willing to pay for the defensive appeal" BAE offers

Deutsche Bank repeated its ‘buy’ recommendation for British defence and security firm BAE Systems PLC (LON:BA.) and upped its price target for the stock to 540p from 518p.

The bank said it expects “good underlying progress” in BAE’s first half results which are due at the end of this week, explaining that Electronic Systems and Platforms & Services International will be the key drivers of this profit progress.

Speaking on the price upgrade, Deutsche said in a note today that it reflects “the higher multiples [it] believe[s] the market will be willing to pay for the defensive appeal that BAE offers”.

It did note however, that a potential rise in the pension deficit will “likely be the only bad news” in the results statement.

Another security services firm, G4S PLC (LON:GFS) also got the approval of the brokers on Monday, with RBC Capital raising its rating for the company to ‘sector perform’ from ‘underperform’, setting a price target of 170p.

Analysts at RBC said the company should benefit from the weaker pound, while recent terrorist attacks will likely see the demand for security services increase.

Deustche Bank took a bullish stance on financial services companies Standard Life PLC (LON:SL.) and St James’s Place PLC, as it upgraded both of the stocks.

The German bank reiterated its ‘buy’ rating for Standard Life and increased its target price by 5p to 325p, while Deustche repeated its ‘hold’ rating for St James’s Place and raised its price target to 885p from 825p.

Deutsche said Standard Life appears “deeply oversold” although it is still predicting a 5-6% rise in earnings per share (EPS) in the 2017/18 financial year.

It notes that the share price has tumbled since Brexit, “probably on fears of a second Scottish referendum”, and sees any further weakness in the stock as a good time to buy.

The bank was more slightly more bearish on insurance firm Aviva PLC (LON:AV.) dropping its price target for the stock to 460p from 470p although Deutsche did repeat its ‘buy’ recommendation.

It said it expects other brokers to follow suit with the modest downgrade, although it does forecast “increasing visibility around future earnings and cash to driver a higher profits-to-earnings ratio over time”.

Elsewhere, consumer goods giant Unilever PLC (LON:ULVR) had its ‘hold’ recommendation reiterated by Jefferies International, although the American investment bank lowered its target price for the stock to 3530p from 3650p.

Jefferies said that although the numbers for the first half were better than expected, but commentary for the second half is “cautious”.

As a result, it expects a “slower” second half of the year, although once combined with the first half numbers that slightly beat expectations, full year results should fall in line with initial expectations.

On the small cap front, Northland Capital Partners has reiterated its ‘buy’ recommendation for metals explorer Mariana Resources Ltd. (LON:MARL), while it also nearly doubled its price target for the company, moving it up to 104p from 54p.

Northland cited today’s news that the firm has completed a “substantial increase” in the mineral resource estimate at its Hot Maden gold-copper project in Turkey.

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