Broker tips: Hikma Pharmaceuticals, British American Tobacco
Analysts at Berenberg raised their target price on drugmaker Hikma Pharmaceuticals from 1,440.0p to 1,740.0p on Monday on the back of the group's recent trading update.
Berenberg stated that last week, Hikma reported "decent" 2022 results, in its view, with no real changes to the group's outlook from January when management presented at a competitor conference.
The German bank, which stood by its 'hold' rating on the stock, said guidance for 2023 looked "achievable" and said consensus was already in line with the ranges given.
"Following the update, we cut our 2023-24 EPS estimates by 2%, reflecting slightly higher financing costs than expected (we are in line with consensus for both years)," said the analysts.
Berenberg said Hikma's injectables and branded businesses were "performing well and gaining share" in their respective markets but noted that its generics unit faced "tough industry headwinds", and that it remains "uncertain about the recovery outlook" for the division.
It also added that Hikma's chief executive search was in the late stages of the interview process, with both internal and external candidates being considered and announcement expected within six weeks.
Analysts at Jefferies slashed their target price on tobacco giant British American Tobacco from 4,700.0p to 4,100.0p on Monday, stated "a lot of bad" was priced in and that risk was arguably skewed to the upside.
Jefferies said current sentiment on British American was probably the worst it has seen it in 13 years covering the name, with recent updates "just adding to concerns".
The broker pointed to a recent worsening of BATS' share of the US cigarette market, upcoming rule changes to menthol and nicotine products by the Food and Drug Administration, the status of its premarket tobacco application decision, a patent dispute in one of its vape businesses, and its recent full-year results as being reasons for skepticism.
However, with that said, Jefferies also admitted that it remains bullish on the stock over the longer term and reiterated its 'buy' rating on the shares.
"While PMTA approval may now be a 2024 event, with expected combined FY23 earnings and yield at double digit, and multiple risk now arguably skewed to the upside in the year ahead, near-term prospects are also still compelling," said Jefferies.