Broker tips: BP, Whitbread, Oil engineering stocks

Investec came away from BP’s seminar this week with largely positive comments, saying that the oil major delivered a “confident upstream update” despite the recent sharp drop in oil prices to below $65 a barrel.

However, the broker said that with uncertainties surrounding Russia and the continued fall-out from the Macondo oil spill disaster still weighing on the business, it has kept a ‘hold’ rating.

Cannaccord Genuity has maintained a ‘hold’ recommendation on Whitbread despite an in-line trading update from the Costa and Premier Inn owner on Thursday, warning of tougher comparatives ahead of the leisure company.

“Whitbread’s share price has become the sector bellwether for the UK consumer and we like its budget hotels and coffee shops rollout strategy a lot, but the share price is slightly too frothy for us to be more positive now,” the broker said.

UBS has eased concerns among investors about the recent sell-off in the energy services sector, saying that share-price reactions have been “overdone” despite plunging oil prices.

Potential cuts in the oil and gas spending “don’t derail the investment thesis” for UK engineering stocks, UBS said. Furthermore, it said that the sector “may actually benefit via lower oil prices stimulating economic activity, and also from lower energy costs”.

UBS said: “In the context of oil-price-specific weakness, we see attractions at Rotork (upgraded to ‘buy’ in October) and Weir. Other top picks we would highlight in the wider coverage are Bodycote, Spirax-Sarco and Tyman. Smiths remains ‘sell’-rated.”