Broker tips: NEX Group, N Brown, Rio Tinto

NEX Group was under the cosh after RBC Capital Markets cut the stock to 'underperform' from 'sector perform'.

The bank said it was reducing its earnings per share forecasts by 13%/8%/7% in FY18/FY19/FY20 and lowering its price target to 600p from 650p.

"While NEX has a number of positives, we believe the shares continue to trade above their fair value despite an increasingly challenging outlook," it said.

Among the positives, it highlighted material earnings growth, positive gearing to increased volatility and higher rates, and event risk.

Nevertheless, it said the shares were trading above their value because NEX is a restructuring story that is running behind schedule. "We believe a second profit warning is possible (particularly given the NEX Optimisation CEO's recent departure) and a downgrade (or extension to FY21) of the FY20 financial 'aspirations' likely."

N Brown is starting to deliver on its transformation plan and after an undeserved pullback in the shares after this month's interim results, HSBC upgraded the shares to a 'buy' rating from 'hold'.

HSBC, which also upped its target price on the shares to 385p from 330p, noted the clothing retailer had delivered a sustained improvement in its key performance indicators over the last three years, and was beginning to add a recovery in earnings momentum.

First-half results added progress on product sales despite tougher comparatives and while the comparatives get tougher again in the second half, current trading was said to be in line with expectations and the group is "well prepared" for peak trading.

"We see potential in the short-to-medium term to extend recent market share gains via product and customer service-led initiatives including the addition of new third-party brands," said the bank.

Analysts at Investec reiterated their "preference" for shares of Rio Tinto among the diversified majors, despite the miner's "mixed" third quarter results.

The main arguments put forward to back up their case were the company's balance sheet, which as the strongest in the sector and its clear focus on shareholder returns.

As evidence of the latter, they pointed to the outfit's $2bn interim dividend and the $4bn of share buybacks unveiled thus far in 2017.

Linked to those buybacks, the analysts raised their estimates for the company's earnings per share in fiscal years 2017 and 2018 by 3.6%, on average.