Broker tips: Diageo, Ocado, Devro

28th Apr 2014 11:53

Credit Suisse has downgraded its rating for Diageo from 'outperform' to 'neutral', saying that challenges are mounting at the drinks group.The bank has lowered its target price for the stock from 2,200p to 1,950p after cutting its earnings per share estimates for next year by 8% to 101p on the back of weaker assumed organic growth in the US and emerging markets, more currency headwinds and higher investment requirements.Shore Capital has reiterated its 'sell' recommendation for on-line grocery group Ocado, saying that margins are facing negative pressure from the current price competition amongst UK food retailers.The comments come after recent developments at retail giant Tesco, which said that it intends to invest more in base pricing in the UK. "Unless Ocado removes its price matching pledge with Tesco, we see its gross margin coming under greater pressure as the market leader sustains price cutting. Ocado does not match Tesco's promotions and so a re-allocation of resource by Tesco to price is troublesome to Ocado in our view."N+1 Singer has maintained a 'sell' rating for Devro after the sausage skin maker effectively delivered a profit warning on Monday."Today's statement further underlines our longstanding concerns around volume and competitive pressure in Devro's core markets," said Analyst Sahill Shan. "We applaud the decisive cost action but ultimately until the top-line stabilises and improves, earnings on a 12-18 month view are likely to remain under pressure."BC