Broker snap: UBS hikes forecasts for Sainsbury ahead of results

2nd May 2013 10:42

Another solid increase in profits is expected from Sainsbury when it reports its full-year report on May 8th, according to UBS which lifted its estimates for the supermarket giant on Thursday.The broker, which kept a 'buy' rating for the stock, lifted its full-year profit before tax estimate by 5.2% to £749m, ahead of the consensus forecast for £746m."This represents a good outturn given industry demand conditions have remained depressed while key competitors have experienced profitability declines in the equivalent period," UBS said.Furthermore, the broker said that guidance for the full-year ending March 2014 is likely to follow the same pattern as the year just gone. It expects mid-single-digit sales growth and ongoing tight cost control to result in another year of "decent progress in earnings"."In our view Sainsbury's returns metrics have remained impressively resilient (flat since FY10) given the abnormally weak industry backdrop (ie persistent volume declines) and a period of heavy capex/space expansion which naturally has a dilutive effect given property lag effects and store maturity profiles. "Looking ahead we think it is plausible that Sainsbury's returns will resume their upwards trajectory in FY14, providing tangible validation for the investment strategy."The target price for the shares has been lifted from 400p to 425p.The stock was up 0.52% at 384p by 10:59.BC