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Broker snap: JPMorgan upgrades AstraZeneca to 'neutral'

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Broker snap: JPMorgan upgrades AstraZeneca to 'neutral'

Tue, 02 April 2013
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AstraZeneca Quote more

Price: 3,781.50

Chg: 23.00

Chg %: 0.61%

Date: 17:02

JPMorgan Cazenove has upgraded its rating for drugmaker AstraZeneca from 'underweight' to 'neutral' and lifted its price target for the stock from 2,750p to 3,400p, causing shares to edged higher on Tuesday.

The broker said that Astra's strategy day on March 22nd "shifted the focus from how to plug the gap with acquisitions to what could be the growth profile from the organic business".

Analysts highlighted that the firm's maximum pay-out ratio should stay at a "credible level" (under 70%) with its cost savings programme and margin targets providing assurance that core earnings per share (EPS) will not fall below $4.00 during this decade.

"We continue to model AZN’s earnings trough in 2017, however, as the pipeline matures and become more tangible in the coming two years, AZN’s growth post 2017 may look more like UCB’s (comfortable double-digit) than GlaxoSmithKline’s (mid-single digit), and hence a trough multiple of up to 20x [earnings] by 2016 (as seen with BMS, LLY prior their trough) would not look implausible and could offer over 60% upside."

The broker has raised its core EPS forecasts by 6.0%, 7.0% , 14% and 13% for 2014-2017, respectively, based on higher emerging markets growth assumptions and reduced Crestor royalties after 2016.

The stock was trading 1.15% higher at 3,337.5p by 10:52.

BC

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