Broker tips: Carnival, BAE Systems, Tesco

25th Sep 2013 11:50

Morgan Stanley has downgraded its rating for cruise operator Carnival from 'equalweight' to 'underweight', saying that the stock's valuation looks 'very demanding' following its gloomy third-quarter results and guidance.Morgan Stanley labelled the outlook as "disappointing" after Carnival didn't commit to guiding to positive net revenue yields next year. It said it is now questioning the "smoothness" of this sluggish yield recovery as is implied by Carnival's valuation "given the track record of underperformance and still fairly high industry capacity growth".UBS has raised its target price for aerospace and defence group BAE Systems from 450p to 490p and retained its 'buy' rating, saying that potential for business in the Middle East can offset a US downturn.The Swiss bank said it understands that a bid for up to 60 of BAE's Typhoons has been submitted to the United Arab Emirates (UAE). Analysts Charles Armitage and Rami Myerson said that win could be worth about 30p per share on a net present value basis. They see a 50% probability of a win and so this accounts for 15p of the target price increase.Supermarket group Tesco was hit by a downgrade on Wednesday by JPMorgan Cazenove from 'neutral' to 'underweight' after the bank said that the company will be the most affected by structural problems in the UK food retailing industry."The discounters (Aldi, Lidl) are disrupting the price/range architecture that the 'Big 4' used for two decades, the customer is demanding a simplified product range, and there is a need for reduced mid-tier pricing," said analysts Jaime Vazquez and Borja Olcese.BC