Broker tips: Carnival, JD Sports, JKX

7th Jan 2011 13:14

Nomura expects cruise operator Carnival to recover the pricing power lost during the recession caused by the booking curve, and raises its earnings estimates for 2011.The Japanese broker says that Carnival's results during 2010 have reflected this recovery, with net revenue yields at constant currency being up 2.5%, after a decline of around 10% in 2008/09."With the assistance of operational gearing we expect margins and return on invested capital to rise back towards historical levels," says analyst Nicholas Thomas. This should drive a strong medium-term earnings per share (EPS) growth (of around 20% every year), along with free cash flow generation.Nomura increases its EPS estimates for 2011 and 2012 by 4% and 8% respectively, and upgrades the 12-month target price from 3,300p to 3,870p, implying a further 23% upside for the stock. Carnival is given a 'buy' rating.Broker finnCap says that shares in JD Sports remain cheap at a discount to the retail sector, and the stock is worth a 'buy' following a great trading update that beat expectations.The sport-themed fashion chain reported Friday that like-for-like sales over the 5-week Christmas period were up 2.5% and cumulative LFL sales for the 48 weeks to 1 January increased by 3.1%.With the group expecting to exceed pre-tax profit expectations for the year, finnCap raises its forecasts for 2011 by 5.4%.However, analyst David Stoddart says that "headwinds in 2011" have restricted the positive base effect on 2012 forecasts, and ups its estimates for next year by a lesser 2.7%.The target price is placed at 1,125p.Financial services firm Matrix has placed the target price for JKX Oil & Gas under review and is likely to cut its valuation by around 10-11% as the group faces a potentially big tax hike in the Ukraine.The oil and gas developer announced Friday that its Ukrainian subsidiary Poltava Petroleum could see its tax rate jump from 30% to around 50%. The broker says that this move is likely to have a material impact on the company's near-term operational cash flows.While this impact would be limited when JKX begins its gas production in Russia through its subsidiary, Yuzhgazenergie LLC, the broker places the target price of 370p under review until more details are announced.The broker, however, sticks with its 'buy' rating.