Broker tips: Supermarkets, Oil services, Sky, Premier Foods

After one of the worst years in living memory for investors and management in the British supermarket sector, broker Shore Capital expects expect 2015 to be another "very active and interesting" year, though the sector's nadir "may have been reached".

"Given the collapse of profits over the last 12-24 months, to a considerable degree reflecting a somewhat delayed reaction to market conditions, we see grounds to believe that the new year will be less disappointing from a performance and earnings outcome," wrote analysts Clive Black and Darren Shirley in a note to clients, but they lamented that there did not appear to be any "quick fix" to sector's woes.

The outlook for the European oil and gas sector in 2015 is “not encouraging”, according to UBS which cut target prices for energy services stocks Petrofac and Hunting on Tuesday.

UBS said: “We remain cautious on [oil] services despite share price declines as capex delays and reductions are likely to impact earnings and sentiment across the sector.”

Broker Liberum has reiterated its ‘sell’ call on pay-TV and broadband group Sky, saying that the company is at risk given its “surprisingly shallow” profit base.

“Most of Sky's profitability comes from outside its core retail base, from areas such as pubs and clubs, wholesale and advertising,” said analyst Ian Whittaker. “This is not necessarily negative but it does mean Sky is more vulnerable to a negative outcome for the Premier League rights.”

Upside risk at Premier Foods remains substantial, according to Credit Suisse which highlighted “signs of stability” in the food producer’s sales.

“We think we can track circa 45% of Premier's sales through Nielsen scanning data, and the series thus far has been a pretty good read for the group numbers,” the bank said. It retained its ‘outperform’ rating for the stock with a 70p target price, despite the recent impact on the business from the struggling supermarket industry.