Goldman Sachs bumps Experian up to 'buy'

Goldman Sachs upgraded Experian to ‘buy’ from ‘neutral’ and lifted the price target to 1,845p from 1,452p saying it now sees around 20% upside to the stock.

The bank expects Experian’s organic growth rate to accelerate moderately from 4.6% in 2016 to 4.8% in 2017 and 5.2% in 2018 on the back of strong delivery in North America and easier comps in Brazil.

This should be combined with gradually improving EBITA margins as new businesses mature and expand margins, while the high-margin Brazil operation is expected to gradually recover, GS said.

Goldman said it would expect the stabilisation of the Brazilian economic outlook to act as a positive catalyst. Its economists forecast Brazilian GDP to accelerate to +2.2% by the fourth quarter of next year from -3.8% in the second quarter of 2016.

“We expect improving sentiment on growing recognition that the growth in US credit services could be much more secular, rather than cyclical, as growth is driven by particular verticals that benefit from secular, rather than cyclical, expansion (eg healthcare).

“We would expect Experian to carry out further M&A, as it has done in the past, to strengthen and complement its existing offering, with acquisitions potentially also offering scope for cross selling.”

At 0954 BST, the shares were up 0.8% to 1,555.50p.