Credit Suisse upgrades PageGroup to 'neutral'

Credit Suisse upgraded PageGroup to ‘neutral’ from ‘underperform’, lifting the price target to 500p from 400p.

The rating upgrade came as the bank lifted its earnings per share estimates for 2017-19 by 10-12% as momentum improves in underlying markets.

Credit Suisse’s EPS estimate for 2017 was lifted to 26p from 23.6p, while its forecast for 2018 was upped to 28.7p from 26.2p. For 2019, its EPS estimate rose to 32.4p from 29.1p.

CS pointed out that growth rates improved through the first quarter as the company benefitted from headcount investment in markets such as France, improved underlying conditions in end markets and the timing of Easter.

“While the Easter effect will reverse into Q2, the underlying business has regained momentum and should benefit from demand for increasingly scarce resources as well as the consequent wage inflation,” it said.

In addition, the bank argued that profitability is likely to be underpinned by cost savings through 2017 and 2018 and improved consultant productivity.

In the medium term, Credit Suisse remains concerned that the permanent recruitment market will be more challenging than in previous cycles due to technological disintermediation. However, it said that in the near term, the cyclical momentum will dominate.

Upcoming catalysts include the company’s Q2 trading statement on 13 July.

At 1020 BST, the shares were up 0.1% to 490.70p.