Broker tips: Next, Asos, Costain

"We think the statement today is a positive read for the UK apparel sector," the Canadian broker stated.

On the plus side, online sales were "strong" against "tough" comparable sales and ahead of expectations, RBC said as it reiterated its 'outperform' recommendation and 6,300p target price.

RBC said the "exit rate" of full price sales had improved throughout December, although it did note the 10.3% drop in like-for-like sales in retail was worse than the 8.3% fall that markets had pencilled-in.

RBC also highlighted the fact that the retailer was fully-hedged against FX risks for the coming fiscal year.

"Expectations for FY20 guidance were somewhat muted given the negative read-across from other retailers. We think the outlook for Next Online looks decent given the Brexit uncertainty and its potential impact on the UK economy.

"Next is fully hedged for FY20, which we think is a competitive advantage given the recent GBP weakness versus the USD, and particularly if this weakness continues into the year."

Over at UBS, analysts were only a tad less upbeat, cutting their target for the online fashion retailer's shares from 6,600p to 6,000p, albeit while sticking to a 'buy' recommendation on the same.

Peel Hunt reinstated its ‘buy’ recommendation on Asos on Thursday following the online fashion retailer’s shock profit warning and share price slump last month.

"As one of the leading global fashion websites, we view the current share price weakness as a rare buying opportunity," said the broker, which has a 4,000 price target on the stock.

It said that following successful trading across early autumn and what had proved to be a very strong year for full price sell-through, Asos misjudged the impact of exceptional levels of discount activity across the market and failed to create a compelling enough campaign for customers, who were shopping at 50-70% discounts elsewhere.

"The profit impact was significant, a point exacerbated by the high level of above the line transition and double running costs for the US and European distribution centres," Peel said.

However, it pointed out that early indications suggest trading levels have picked up into December’s clearance activity and said February’s trading update should confirm that sales performance is above revised full-year guidance of 15% group revenue growth.

Asos shares crumbled in December after it downgraded its guidance for the year as weaker trading in November and heavy discounting took their toll.

Analysts at Liberum reiterated their 'buy' rating on construction and engineering outfit Costain following the group's in line trading statement on Thursday.

Costain told investors earlier in the day that full-year results should be in line with the board’s expectations as it continued to perform well in the second half.

The London-listed company ended the year with an order book at a record level of £4.2bn, helped by Regional Investment Programme, and net cash of more than £110m.

Liberum said Costain's "strong pipeline" in road, rail and utilities should drive further order book growth and highlighted the fact that the group had been capable of scoring some promising contract wins in the connected autonomous vehicles market.

The broker also stated that it expects to see no impact on Costain from delays to the Crossrail project.

"There are industry concerns about the delays at Crossrail, especially about Bond Street station, where Costain has a joint venture with Skanska."

"The problems seem to be more with the systems and the delays to the procurement of rolling stock and Costain's contract is performing satisfactorily."

Liberum noted that while HS2 has had a slow start as a project, Costain is involved in the enabling works in the South, where there was good momentum.

"There is speculation that the Northern section might be stopped, but it is likely that other solutions would take its place."

In addition to reiterating its 'buy' rating, Liberum stood by its 545p target price on the firm.