Broker tips: BP, Wolseley, Dixon's Carphone
Analysts at Barclays raised their target price for shares of BP, telling clients the benefits of the company's efforts over the past five years to revamp itself were set to start flowing through.
Following the company's downstream investor day, Barclays bumped up its target on the stock from 625p to 675p and reiterated its 'overweight' recommendation.
A differentiated offering in both retail and lubricants, combined with with greater efficiency, would deliver growth, they said.
"We expect it to become increasingly evident that the downstream business can deliver growth in both earnings and cashflow for BP and is far from the low-growth stable business we had previously assumed."
Nevertheless, they remained "cautious" on the prospects for the refining business.
Updating their models for the data provided by BP the broker lifted its earnings estimates for downstream in 2021 by roughly 40%.
Berenberg bumped up its target price for Wolseley's shares on the back of a stronger outlook for the US, a better-than-expected performance at its Nordics business and expectations for the drop-through rate to begin improving.
All of the above led the German broker to lift its earnings per share estimates for Wolseley in 2017 and 2018 by 8% and 2%, respectively.
A combination of tighter cost control and product price inflation meant double-digit drop-through was achievable in fiscal year 2018, it said.
Its forecast was for -10% drop through in the US for fiscal year 2018.
The current valuation gap between Wolseley's stock and that of its peers should also narrow as the company's exposure to the US increased, Berenberg said.
At a 2018 price-to earnings multiple of 14.3, its shares were sitting at roughly a 25% discount versus its American peers, despite having a similar growth profile.
Concerns regarding Amazon.com were also being overdone, according to the broker.
Analysts at Credit Suisse trimmed their target price for shares of Dixons Carphone but continued to hold a favourable view on the outlook for the stock.
They conceded that the company's exit from its joint-venture with Sprint and remarks about a challenging mobile market in the UK did not help sentiment.
However, they pointed out how investors were seemingly 'looking-through' successive positive updates from the company, focusing instead on the broader downbeat picture for UK consumer demand and Britain's economy.
Be that as it may, core trading at Dixons continued to be "robust" and the broker still held a "positive" view of the company.
Its analysts believed Dixon's was set to continue gaining market share at the expense of independents and grocers. Industry-high margins were sustainable too, Credit Suisse said.
Valuation was also supportive, with the shares changing hands at a forward price-to-earnings multiple of just 8.2 and sporting a 4.1% dividend yield they were "cheap", the analysts said.