Broker tips: Capita, Premier Foods, Stagecoach

10th Oct 2011 12:57

Galvan Research and Trading rates Capita shares as a buy, saying that the firm could see an "outsourcing bid pipeline boom"."Outsourcing is designed to achieve efficiencies and is particularly suited to economic downturns, a factor well illustrated by the Capita forward bid pipeline," said head of research Andrew Gibson."Even though the stock has outperformed the FTSE 100, the 'rapidly replenished' bid pipeline has arguably yet to be factored into the current valuation," he said.The stock is given a target price of 760p.RBS has downgraded its rating on Premier Foods from buy to hold and cut its target price by a whopping 84% following the group's profit warning on Friday. "We believe an element of the profit loss from the 1H11 customer dispute (widely speculated in the press to have been Tesco) is at least semi-permanent, as competitors have been given greater shelf presence," RBS said.The broker cuts its full-year trading profit forecasts from £230m to £189m in 2011 and from £249m to £216m to 2012.The target price now stands at just 6p, from 38p before.Panmure Gordon has raised its target price for bus and train group Stagecoach from 260p to 280p and kept its buy rating."Whose hands would you prefer to take advantage of the potential of Megabus in North America and the significant number of UK rail franchises up for grabs in the coming years, whilst protecting industry-leading margins in UK Bus? The successful development of several Megabus hubs in North America, with surprisingly high operating margins, bodes well for profitable growth opportunities," said analyst James Cooke. He adds that the group's excellent operational track record should help its bid for large UK passenger rail franchises in the future.BC