Broker tips: Barclays, C&W Comms, Reckitt Benckiser

9th Feb 2011 12:17

How Barclays' management addresses the group's challenges in its 2010 results will be critical to convince the market of its ability to make attractive returns, according to Japanese broker Nomura."With a new chief executive officer presenting, any comments made around initiatives to improve group returns will be an important indication for the shares. In our view, the market will likely be looking for mention of specific plans rather than generic targets and we remain cautious on any optimistic expectations of fast step change," says analyst Robert Law.The broker remains more cautious than consensus in regards to group pre-tax profit, expecting £5.1bn for 2010 (against £5.8bn) and £6.8bn for 2011 (against £7.6bn).With revenues at the group's key driver, Barclays Capital, expected to be weak, Nomura believes that Lloyds is better placed to achieve attractive returns and gives Barclays a 'neutral' rating and target price of 300p.RBS has kept its 'hold' rating on Cable & Wireless Communications (C&W) after a mixed third quarter statement, and has made minor reductions to its forecasts after indications that trading in the Caribbean has been challenging for the telecoms group."Whilst mobile subscribers in Panama remain volatile (down around 8% quarter-on-quarter), the strength of the average revenue per user figure suggests it was low-spending subscribers that come off the base," the broker says.However, the Caribbean business continues to face "challenging trading conditions" as hurricanes disrupted operations in islands including Barbados, St Lucia and St Vincent, costing the group around $5m. RBS lowers its forecasts for 2011-13 earnings before interest, tax, depreciation and amortisation by around 1%.For 2011-13, the broker estimates that C&W's 5-10% free cash flow yields are lower versus its European peers and, "with a dividend yield of 10%, we believe the market remains concerned about the dividend's lack of near-term cash cover."RBS sets its target price for the shares at 49p.While Panmure Gordon keeps its positive stance on household products group Reckitt Benckiser, it notes that its rating will remain clouded for some time to come.Reckitt, responsible for brands such as Dettol, Cillit Bang and Nurofen headache pills, produced a mixed picture in its 2010 results. Like-for-like sales growth was in line with expectations, at 4% in the fourth quarter, 5% for the full year on a rounded basis. The broker notes, however, that sales were slightly light in the final three months at £2.27bn, compared with forecasts of £2.35bn. "Pharma growth remains strong however and the fact that Suboxone film strips [its opioid dependence treatment product] have already grabbed 25% of the market in the US does reduce the potential hit to generics if and when they enter," the broker said.Panmure maintains its 'buy' rating and 3,800p target price.