Broker tips: Croda, Experian, Tullett Prebon

7th Nov 2014 11:57

Specialty chemicals manufacturer Croda has multiple positive features, yet even after the recent share-price underperformance those are more than fully reflected in the share price, Canadian broker Canaccord Genuity said in a research report sent to clients.Additionally, it expects the firm's future growth rates to disappoint, with negative implications for the stock price.What are those features? A sound product offering, technologies and market positioning, said analyst Paul Satchell.In particular, Satchell pointed out the "surprisingly high" negative impact from foreign exchange translation, which at -7.3% shaved 3.3% from the top-line.Even so, he admitted the "directionally confident" outlook from the company, although he added that the outlook was"vague".Canaccord thus maintained its 'sell' recommendation and 1,950p target price on the shares.Nevertheless, the stock was up 4.6% at 2,359p by 11:04 on Friday. Despite the improved market conditions seen over the last few months and the fact that the 14% decline in revenues year-to-date was in line with its forecasts, broker Peel Hunt believes that a higher rating for inter-dealer broker Tullett Prebon is not justified.True, trading on December 2015 price-to-earnings multiple of 9.3, falling to 8.2 next year, the stock does not look expensive, the broker concedes. Then there is the dividend yield of close to 6% which offers support.However, the prevailing environment suggests the dividend is unlikely to grow significantly.As well, without another material decline in revenues there is limited scope for further cost reductions unless management is willing to risk starting to damage the business.More significantly, there remains the core problem of a lack of visibility on the trading outlook.Hence, "in the short-term there is little to suggest that a higher multiple is appropriate", analyst Stuart Duncan wrote in a research report e-mailed to clients.In reaction to all of the above Peel Hunt reiterated its 'hold' recommendation and 255p target price on the shares. Shares in Experian were continuing to rise on Friday, a day after the credit-checking firm's well-received first-half results, after Canaccord Genuity upgraded its rating for the stock from 'sell' to 'hold'.Experian said on Thursday that revenues were flat on a continuing organic basis in the first half, though currency movements and acquisitions contributed to reported sales growth of 5%. Margins, however, fell 40 basis points to 26.2%.Canaccord said that while the group's operating performance was "disappointing" during the first half, it was "compensated by a better than expected interest and tax charge".Meanwhile, Experian reduced its guidance for the full year, predicting only subdued growth in the third quarter before an improvement in the fourth. At the first-quarter stage, the company had anticipated a return to "more normal growth".Nevertheless, Canaccord said: "After a period of sustained relative and absolute under-performance we are moving our long-standing 'sell' recommendation up to 'hold'."We believe that there remains risk to forecasts, specifically in Latin America due to the weak Brazilian economy and US due to the changes in the consumer product line. However, the share price, following a series of earnings downgrades, has weakened to a point of fair value."The broker has lifted its target price from 858p to 928p, helping Experian's shares 3% higher to 1,029p on Friday, following a 6% surge the previous session.The stock was also boosted after Credit Suisse reiterated its 'outperform' rating, JPMorgan Cazenove kept an 'overweight' stance, and Beaufort Securities, Deutsche Bank and Liberum Capital all retained recommended a 'buy'.