Broker tips: Experian, Weir Group, Applegreen

Morgan Stanley upgraded Experian to 'overweight' and increased its price target for the credit checking company on a positive outlook for its business-to-consumer operations.

Trading for Experian has been resilient during Covid-19 and structural growth trends have accelerated further, Morgan Stanley analyst Anvesh Agrawal said. He upgraded the shares from 'equal weight' and increased his price target to £33.30 from £28.20.

"The B2C outlook is even more bullish than we initially anticipated," Agrawal wrote in a note to clients. "The stock remains expensive, as ever, but we find waiting for a pullback has rarely worked. Back to overweight on this multi-year compounder."

Experian increased its guidance for second-quarter revenue in September after stronger trading in July and August. The FTSE 100 company said the upgrade was due to strength in US mortgages and services for consumer.

Shore Capital put its rating on Weir Group under review from 'hold' after the company agreed to sell its oil and gas business in a move the broker said was positive.

After saying in February that it wanted to sell the oil and gas operation Weir announced on Monday it had struck a £314m deal to sell the business to Caterpillar for cash.

Shore, which kept its 1,280.0p price target on the stock, said the sale would make Weir more resilient and less exposed to the economic cycle, leaving it as a pure-play mining technology business. The FTSE 250 company will use the money to reduce its leverage and invest in mining growth opportunities.

"While we are slightly surprised by the timing of the sale given the current oil and gas conditions, we are pleased to see the proposed transaction at a reasonable price, and which significantly changes Weir investment case," Shore analysts Akhil Patel and Tom Fraine wrote in a note to clients.

Analysts at Berenberg cut their target price on convenience store operator Applegreen from 630.0p to 450.0p on Monday but stated that the firm still appeared to be "better placed" than many other travel-reliant businesses.

Berenberg acknowledged that like all businesses exposed to the travel market, Applegreen had a "tough" first-half. However, despite the "significant hit" to traffic volumes at the height of the Covid-19 pandemic, the analysts highlighted that the company generated "comfortably positive" underlying earnings in the period.

Since then, with the economy reopening and individuals remaining wary of public transport, the German bank pointed out that traffic had actually increased markedly, resulting in "a swift improvement" in Applegreen's trading and financial position.

"Thus, while we acknowledge leverage may be a concern for some investors, we envisage plenty of upside as the recovery continues and net debt declines," said the analysts, who also reiterated their 'buy' rating on the stock.