Broker spotlight: Cairn Energy, Diageo, Kingfisher, Lloyds Banking, miners, Sky, Vodafone

Jefferies catches up with events at Lloyds Banking, upgrading the lender to 'hold'. Cazenove makes a few downward adjustments to price targets for the miners.


Things are finally moving fast at Lloyds Banking (LON:LLOY) and US broker Jefferies has been catching up with events.

It has upgraded the lender from ‘under-perform’ to ‘hold’ and cranked up the price target from 69p to 88p, with the bank set to enjoy a bit of a windfall from the takeover of TSB, in which it still has a chunky stake.

The broker says there is now a better reward/risk balance for the  investor with the firm having a "progressively" rising dividend - 4.2p a share based on 2017 estimates from 0.75p in 2014.

It's not a 'buy', says the broker, because the problem with Lloyds is that consensus earnings expectations have been falling and earnings upgrades will be needed to drive a re-rating but these are hard to come by.

Another Footsie heavyweight getting upgraded is pay-TV pioneer Sky (LON:SKY), which HSBC has moved to ‘hold’ from ‘underweight’.

Liberum has looked at advertising giant WPP (LON:WPP) and kicked up the target price to 1585p from 1280p previously.

"We see WPP as the best positioned of the agency groups in that it has the best exposure to faster growing markets, the right digital strategy and sufficient flexibility to make targeted acquisitions," said analyst Ian Whittaker, repeating a 'hold' on the shares.

The analyst said, strategically, it has no problems with WPP - it foresaw – correctly – the trends in digital and positioned itself accordingly and it is well-positioned in faster growth markets.

Oil & gas blue-chip Cairn Energy (LON:CNE) gets some love from Swiss broker  UBS, which moves from a neutral position to a positive one, but elsewhere in the resource sector JP Morgan Cazenove has been trimming its price targets for miners Anglo American, Antofagasta and BHP Billiton.

The price target for Anglo (LON:AAL) is cut to 1,080p from 1,170p; FAGS (LON:ANTO) moves down to 650p from 710p and BHP Billiton’s new price target is 1,690p, down from 1,720p.

"Global demand for industrial metals in Q1’15 undershot our expectations, particularly in China and well flagged mine supply disruptions are not expected to be severe enough for bullish price formation in 2015," said analyst Fraser Jamieson.

The broker has reduced its 2015/16 copper prices by 3%/6%, aluminium by 5%/9%, zinc by 4%/6% and nickel by 14%/15%. 

China base metals demand was weaker than our expectation in Januaryb this year, said the broker, and the robust pick-up after Chinese New Year that many anticipated had failed to materialise..

Yesterday’s strategy shift from Kingfisher (LON:KGF) was applauded by the market, and has prompted Nomura to nudge up its price target from 305p to 315p to justify maintaining its neutral position on the retailer.

"Overall the aim is to increase sales whilst maintaining gross margin and lowering cost, leading to an improved operating margin," said the broker.

"However, the road to achieving this is likely to be bumpy and the new management team look to identify and articulate the key execution plan over the next year or so." 

The same broker trims its price target for liquor brands leviathan Diageo (LON:DGE) – from 1,980p to 1,930p – and mobile phone networks colossus Vodafone (LON:VOD) – from 190p to 185p.


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