Broker snap: Panmure Gordon lifts Aviva price target

9th Aug 2010 11:05

Panmure Gordon is upgrading its earnings forecasts for Aviva after much better than expected interim results from the insurance giant last week. "On a market consistent embedded value (MCEV) operating profit basis we have increased 2010 forecast to £3,886m (+12%) from £3312m (-5%) driven by improvements in pretty much all areas of the business. This translates into us increasing our 2010/11F MCEV operating earnings per share by 20% and 12% respectively to 90.1p/share (75.2p) and 85.6p/share (76.4p)," Panmure analyst Barrie Cornes said.The broker is also bumping up its dividend forecasts after Aviva upped its interim pay-out by 5.5% and showed better than expected cash generation.Panmure Gordon now expects the current full year dividend will be 26.04p, having previously forecast 25.19p, while the 2011 dividend is now forecast to be 27.38p, versus previous expectations of 26.49p."There are a number of drivers that will impact on the final dividend according to the company and it is our view that whilst Aviva could pay a higher dividend we suspect that being one of the highest yielding stocks in the FTSE 100 at 6.9% it has little need to ahead of Solvency II and an improvement in economic conditions," Cornes suggests.The broker has reiterated its "buy" recommendation and has lifted its price target from 496p to 535p.