Broker snap: UBS downgrades Prudential after strong rise

18th Mar 2013 10:32

Insurance, pensions and fund-management group Prudential was trading in the red on Monday morning after UBS cut its rating for the shares from 'buy' to 'neutral' following the stock's recent outperformance.The share price has surged over the last few months, though the broker believes that this was more to do with a re-rating, rather than upward revisions to consensus estimates.UBS said: "Pru is clearly the best managed insurer in the sector, in our view. However, the stock is up 30% year to date, and up 13% since the evening before FY12 results were published. Although the results were better than expected, we are not materially raising our forecasts due to cautious guidance on US spread margins. "If anything, our 33.1p FY13 dividend per share forecast (+13%) looks full, given talk of mid-single digit growth."After eliminating the conglomerate discount it had applied to its target price - "which seems unwarranted given the quality of all four businesses, and given a lack of agency risk" - the broker has raised it from 1,000p to 1,150p. However, it broker said that the risk/reward balance no longer looks compelling and has decided to take a more cautious stance "with economic headwinds still to navigate".Shares were down 2.34% at 1,127p by 10:32 on Monday.BC