JPMorgan upgrades Mitchells & Butlers to 'overweight'

JPMorgan Cazenove upgraded Mitchells & Butlers to ‘overweight’ from ‘neutral’ following the company’s first quarter trading update.

The bank said while trading conditions remain tough, M&B’s AGM update showed an improvement in the trajectory of like-for-like sales growth and operating margins.

It said LFL sales growth continued to be negative in the nine weeks since M&B last reported – down 0.6% – but pointed out this is still an improved from the 1.6% drop in the first eight weeks of the year.

In addition, the bank noted the sharp drop in the shares, which are down nearly 20% since the full year results in late November and said the stock is trading at an “excessive discount” to the sector at current levels.

JPMorgan kept its earnings estimate unchanged at £334m FY2016E operating profit, but cut the target price on the stock to 370p from 420p.

At 0923 GMT, Mitchells & Butlers shares were up 0.9% to 290.90p.