Broker tips: AJ Bell, Hargreaves Lansdown, Croda

Citi has placed AJ Bell and Hargreaves Lansdown on "negative catalyst watch" as part of its review of the European diversified and specialty finance sector.

"The growth-oriented diversified financials sector has faced a challenging couple of years, as financial investors have favoured banks and insurance," said Citi. "Yet expectations for falling interest rates during 2024 should be supportive for the sector as a whole, and in particular for the alternative asset managers, which is our preferred subsector," the bank said in a research note."

Citi noted that it was 'overweight' on the exchanges and 'underweight' on investment platforms and Swiss private banks.

"Our most-preferred stocks are Allfunds, Intermediate Capital Group and London Stock Exchange Group. Our least-preferred stocks are EQT, Hargreaves Lansdown and Vontobel. We open new negative catalyst watches on AJ Bell and Hargreaves Lansdown."

Analysts at Berenberg raised their target on diversified chemicals business Croda from 50.0p to 52.0p on Friday, stating the group's results "should provide what the market has been looking for".

Berenberg stated 2024 may be a year, initially at least, when Croda's share price temporarily uncouples from its earnings – to the upside - but noted there was likely to be, in its view, another round of cuts to a "stale" full-year 2024 underlying earnings consensus before its 2023 earnings on 27 February.

"The reasons for this are, in our view, the continued pressure on sales in agriculture and higher compensation expenses. We believe the company may guide for a modest decline in earnings yoy in 2024," said the analysts.

However, the German bank, which reiterated its 'buy' rating on the stock, added that Croda's results should show signs of "a gradual recovery" in consumer care volumes as consumer discretionary incomes improve.

"In an environment of falling discount rates, this may lead to a rally in the share price even against the backdrop of trims to earnings. Low leverage should also enable Croda to hold its FY23 dividend flat despite a decline in earnings," said Berenberg. "The cuts to 2024 and 2025 EPS reflect higher assumed variable remuneration, reductions to which were (on our estimates) a circa £20.0m tailwind to 2023 EBIT. Shares trade on 25.6x 2025 P/E, below peer Givaudan on 29x."