Broker tips: Hunting, Burberry, Relx

Hunting reported sales of $929.0m, up 28% year-on-year, and underlying earnings of $103.0m. Visibility for 2024 was said to still be strong, with a sales order book of $565.0m, up 19% on 2022. The outlook for further growth was said to still be strong, with end markets showing long-term demand for Hunting's products, and multiple further tenders ongoing.

"We see these results as an important step in Hunting's steadily building record of growth and profitability; as highlighted in the results presentation, there remains extensive scope for further improvement, as well as the potential that a robust balance sheet and profitable underlying business enables," said Canaccord Genuity, which reiterated its 'buy' rating on the stock.

"We base our target for Hunting on multiples, which means both an occasional shift forward in years and a strong element of judgment. With the business generating cash, with an outlook underpinned by a substantial order book, and with the potential for value-accretive transactions, we are raising our target to 450.0p (was 400.0p). At our target, the stock would trade at 7.2x/5.5x FY24/25E EV/EBITDA, which we still see as a conservative multiple."

JP Morgan has added Burberry to its 'negative catalyst watch' list ahead of the British high fashion brand's annual results as the wider luxury sector continues to contend with a major slowdown in growth.

The bank said, following results from others in the sector so far, the upside surprise to numbers has been limited, with Moncler and Hermes accounting for most of the positive performances.

"Our client conversations continue to focus on the debate of what normalisation will look like in H1 this year [...], and what the catalyst to drive further sector re-rating may be given no real profit growth in H1 and already positive expectations embedded for H2," JP Morgan said. "The key take from earnings, similar to this stage in previous cycles, is that brand momentum is increasingly important to navigate in this environment, creating a growing divide between the winners and the laggards."

Burberry, which was due to report its full-year results in May, delivered a profit warning to the market in January – its second in three months – on the back of a major luxury-market slowdown, saying that adjusted operating profits for the 12 months to 30 March will be between £410.0m and £460.0m, below previous guidance.

Berenberg downgraded Relx to 'hold' from 'buy' on Friday following the recent share price outperformance.

The German bank noted that the shares were up 38% over the last year, adding £17.0bn to its market capitalisation, hence the decision to take profits and downgrade the rating.

"We previously argued that Relx's scope to positively surprise on scale of buybacks was underappreciated, and this catalyst crystalised at the full-year results on 15 February, with management announcing a £1.0bn buyback for 2024," it said.

Berenberg also previously argued that Relx's medium-term growth was more sustainable than consensus appreciated. However, it noted that consensus had now seemingly caught up and its price target soon became the lowest amongst brokers with a 'buy' recommendation.

"Looking forward, we struggle to see catalysts to drive further significant near-term share price outperformance. As such, we downgrade to hold, albeit we increase our price target to 3,500.0p (from 3,300.0p previously)."