Broker tips: Pearson, BBA Aviation
Deutsche Bank is sounding a somewhat cautious note on the outlook for Pearson until the company provides greater detail on its cost-cutting plans.
On 5 May, the education publisher announced it was targeting a greater-than-expected £300.0m run-rate of cost savings by 2020, but provided no specifics regarding the phasing of the costs cuts and savings or to what extent they would hit the company's sales.
Uncertainty about the latter meant it was difficult to estimate to what extent the cost cuts would offset earnings dilution from asset disposals, such as it K12 courseware, its stake in PRH or its GEDU and Wall Street English units, the broker said.
So, with "limited visibility on savings, disposals and trading" analyst Chris Collett opted to stick with his 'Hold' recommendation and 600.0p target price.
BBA Aviation has been downgraded to 'neutral' from 'buy' by Citigroup, with the US bank highlighting recent turbulence in foreign currency markets and a 66% jump in the share price over the past twelve months as reasons to chart a lower flight-path for the stock.
BBA’s numbers were boosted by the performance from its Signature Flight Support section.
Organic revenues at the Signature fixed-base operation unit grew 3% with strong "drop through" continuing to demonstrate market outperformance, BBA said in the update.
However, Citi noted such growth was below the 4% increase in US Business&General Aviation activity, although the broker expected an acceleration to 3.3%, supporting a 13% rise in operating profits.