Broker tips: Barclays, Spirax Sarco, Auto Trader
Investec's Ian Gordon hailed Barclays's decision to dispose of the majority of its stake in its African unit, reiterating that it was the broker's preferred large-cap UK lender.
The analyst also urged the lender's directors to use its robust capital position to call its costly $2.65bn of preference shares, which carried an 8.125% coupon.
Tuesday night's divestment also underpinned his expectation for a "material step-up" in the 2018 dividend.
"We regard Barclays’ capital position as robust, and as such, it is now time to deploy that capital strength to boost earnings. Calling the prefs would “cost” c.25bps of CET1 capital, but save a £0.2bn p.a. coupon cost," the analyst said.
Overnight, Barclays said it would sell a 33.7% slice of Barclays Africa - more than had originally been expected - reducing its holding in the lender to 14.9%.
Analysts at Deutsche Bank reiterated their 'buy' recommendation on shares of Spirax Sarco on the back of the engineer's shift away from special dividends and towards non-organic growth.
The broker highlighted how over the past six months the firm had spent £540m scooping up Chromalox, Gestra AG and Aflex House.
That was roughly five times the amount spent over the preceeding 10 years and followed its 2014 strategic review, in which management set out leveraging strengths in key sectors, expanding the addressable market and capitalizing on the most attractive opportunities as its main objectives.
"We view reinvestment in M&A as a welcome move away from a recent track record of special dividends, with £190m distributed 2010-14.
Auto Trader got a boost on Thursday as Barclays bumped the stock up to 'overweight' from 'equalweight' and lifted the price target to 470p from 425p ahead of the full-year results on 8 June.
The bank said there are risks in the outlook for used car pricing, but it does not expect wide forecourt closures. Even if that were to happen, what matters most for Auto Trader are levels of used car stock, Barclays pointed out.
"Here a decent outlook for used car transaction volumes should be a tailwind. We have also dug into new products: part exchange, financing and new cars. We think the latter two, in particular, will become meaningful contributors."
As a result, the bank is now forecasting 10% average revenue per retailer forecourt growth in full-year 2018 and 9.5% in FY19, and it's 7% ahead of consensus earnings per share in FY18.