Broker tips: Glaxo, Home Retail, engineers

11th Jun 2009 11:44

The share price of drugs giant GlaxoSmithKline has moved sideways since the start of March and has some catching up to do in relation to the share price performance of its European peers, reckons Morgan Stanley.The US bank has upgraded its rating on the stock from 'underweight' to 'equal weight' and set a price target of 1320p as part of a review of the European pharmaceutical sector. GSK's shares have underperformed the European pharmaceuticals sector by 12% in the year to date.'Longer-term, we continue to strongly endorse the chief executive's dynamic strategy in moving towards a diversified healthcare model, which we believe will create significant shareholder value long-term,' said Morgan Stanley analyst Andrew Baum.Home Retail Group looks to be a major beneficiary of the collapse of Woolworths after its Argos division reported this morning that consumer electronics sales continue to grow while toy sales are strongly ahead of last year.Meanwhile, the demise of MFI could be a major factor in the growth of kitchen sales at Home Retail's Homebase outlets, broker KBC Peel Hunt reckons.The misfortunes of now extinct retailers have brightened the outlook for Home Retail, giving 'scope for measured forecast upgrades,' KBC reckons. Singer Capital Markets is also expecting earnings forecasts to be upgraded as a result of better than expected trading in Home Retail's first quarter, even if sterling continues to be weak.'Despite this continued pressure [from the weak currency], and as a result of today's better than expected performance we would expect market estimates to creep up by c.3-4% from the current c. £190m towards £200m PBT [profit before tax],' Singer notes. Automated process control and power monitoring group Invensys is proving more resilient in the downturn than Goldman Sachs expected, prompting the US bank to upgrade its rating on the shares.'The group's Operations Management business appears to be weathering the downturn better than we had expected, and in the context of our higher 2009 and 2010 end-market forecasts for oil and gas capex, we raise our forecasts for the company,' Goldman Sachs said.The bank has raised its rating on Invensys from 'neutral' to 'buy' in a research note on the European capital goods sector. The sector's rating has been upgraded from 'neutral' to 'attractive'. 'Leading indicators suggest a stabilization of the global business cycle, and our economists' 2010 global GDP growth forecasts are above consensus,' the US bank said.UK engineer Tomkins also gets upgraded from 'neutral' to 'buy'.