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Broker spotlight, including Marks & Spencer, Homeserve, Tesco and Savills

High Street bellwether Marks and its fourth quarter numbers  due on Thursday has the analysts busy on Monday, with several brokers covering the retailer
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High Street bellwether Marks (LON:MKS) and its fourth quarter numbers this Thursday has the analysts busy on Monday, with several brokers covering the retailer.

It moves the stock to 'top pick' from 'outperform' by RBC Capital Markets and the target is 600p, compared to the current price of about 540p.

Credit Suisse also gives the target a shove - pushing it up to 450p from 360p - in the light of higher sector valuations but its rating is 'underperform'.

Analyst Simon Irwin says the broker remains well under consensus on its forecasts for the next two years.

He notes that fourth quarter is traditionally a quiet quarter, and  sees few signs that M&S can stabilise LFL or market share in GM while boosting gross margins.

Food is gradually slowing, while International looks very challenging and for general merchandising, it remains cautious that it can improve gross margins and deliver positive like-for-likes, especially with another two plus years of supply chain restructuring to come.

Joint broker to the retailer Citi, expects the chain to report a 0.1% decline in underlying sales of GM - practically bringing 14 consecutive quarters of falling sales to an end.

Sticking with the retail theme, Goldman Sachs has a look at supermarket supertanker Tesco (LON:TSCO) with less optimism and has repeated a 'sell' call on the shares.

It reckons with the stock up  27% since the chief executive's initial strategic comments in January, the broker believes that a material Tesco UK recovery, or asset sales at large premiums to recent transactions, are currently priced in.

That said, Goldman does push the target price on the shares up to 200p from 155p.

US broker Citi looks at Savills (LON:SVS) today, describing the lettings and property group as "so much more" than a UK estate agency. It has started covering the shares with a 'buy' rating and target price of 1,020p (current price: 8,080p).

Analyst Christopher McVey notes that with 11% of 2015 estimate revenues from residential transactions, Savills was "largely" protected from weakness in UK residential volumes. 

He added that property’s attractiveness as an asset class will continue to grow given the income as well as capital appreciation potential. 

"Savills’ global presence leaves it well placed to facilitate this further capital allocation into an investment market which remains small in size when compared to debt or equity."

Homeserve (LON:HSV), the boiler and heating cover firm, gets a boost from JP Morgan Cazenove as the week begins, as it raises the target price on the shares to 408p from 369p previously.

Homeserve, which recently issued a  pre-close statement ahead of full year results in May, will finish 2015 with 2.1 million customers at the UK. This is the same level as 2014, noted analyst Jolyon S Wellington.

"This brings to an end the decline in UK customer numbers that has been ongoing since FY11. 

"This is no surprise given the group’s earlier guidance that year end UK customer numbers would be ‘at least 2 million’. 

The analyst also noted that it believes customer growth has continued to be positive in Spain and it expects a high retention rate in France at the full year results. 

Good trading has allowed it to invest in marketing activity in the US, the broker added.


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