Broker snap: Wet weather dampens Britvic's prospects

25th Aug 2011 12:39

It may be coincidence that the streets of London were soaked with rain this morning, but Nomura has chosen today to revise ts earnings estimates for soft-drinks firm Britvic, to factor in Europe's miserable weather.The Japanese broker thinks Britvic's fourth quarter (to September) will be weak, given the poor weather - "especially in Britain", analyst Ian Shackleton notes.Shackleton reckons the Chelmsford-based J2O and Tango maker will see organic revenue growth in Britain of just 1% in the company's fourth quarter (to September). As a result, it cuts its full-year earnings before interest and tax estimate from £138m to £134m.For fiscal 2012, assuming lower economic growth in Western Europe, "we assume a GB revenue run-rate of 2.5%, below our estimate of medium-term growth rate of 5% p.a., with particular soft performance in stills."Despite the gloomier earnings outlook, Nomura still thinks the company will reward patient shareholders with an 8% increase in the final dividend, in line with the increase in the interim dividend. Based on Nomura's earnings projections, this would see dividend cover falling to 1.9."On our new estimates the shares trade on a calendar 2012 PER [price/earnings ratio] of 8.4x and offer a FY11 [full-year 2011] dividend yield of 5.8%," Nomura said, as it reiterated its "buy" recommendation, despite cutting its price target to 415p from 480p.