Broker tips: Glaxo, Shell, CSR

29th Oct 2009 13:02

Panmure Gordon is upgrading its earnings forecast for GlaxoSmithkline for the second time in six months, even though it described the pharmaceuticals behemoth's third quarter results announced on Wednesday as 'unspectacular'.The broker has nudged up full-year 2009 earnings per share (EPS) estimates from 111.4p to 113.5p, and 2010 EPS estimates up from 107.2p to 114.7p.'In the pipeline, we eagerly await publication of a second phase III trial for Lupus drug candidate Benlysta on Monday 2 November. Of more immediate importance, darapladib appears to have passed its first interim safety review, revealing no troublesome safety signals particularly relating to blood pressure elevation. This allows the project to continue with the launch of a second phase III trial, in some 13,000 patients,' the broker notes.Darapladib represents 'a significant Greenfield opportunity' for Glaxo, the broker reckons. If it succeeds in redefining how atherosclerosis is prevented, it could be a '$7bn-8bn opportunity,' the broker claims.On projected 2010 earnings the stock is trading on a price/earnings ratio, putting it in line with the European pharmaceuticals sector. The broker rates the stock as a 'buy', with the dividend income there to provide support. Panmure's price target remains unchanged at 1,400p.In contrast, Standard & Poors Equity Research rates the stock no more than a 'hold', though it sees some positive aspects.'The positive impact of Cervarix (HPV vaccine) finally approved by the FDA [US Food and Drug Administration] this month - two years behind our original forecast - remains to be seen in 2010. GSK's unique adjuvant (immune enhancer) may bring a paradigm shift in vaccines due to its longer shelf life (2-3 years) with flexibility for variable antigens,' analyst Sho Matsubara notes, adding that the company should book £800m of pandemic flu vaccines sales in the fourth quarter.The research agency has has lifted its blended 12-month price target for Glaxo from 1170p to 1330p.Shares in Royal Dutch Shell took a kicking Thursday morning after the Anglo-Dutch oil giant's third quarter upstream earnings disappointed, but Charles Stanley advocates holding the shares to see how new Shell boss, Peter Voser's reorganisation of the group pans out.Charles Stanley analyst Tony Shepard believes the current year is one of transition for Royal Dutch Shell with the new chief executive officer, Peter Voser, seeking to improve accountability within the group.With the shares trading on a multiple of 14.5 times 2009 earnings and 10 times projected 2010 earnings, the shares remain worth holding, in the broker's opinion, backed as they are by a sterling dividend yield of 5.5%.Canaccord Adams also rates the shares as no more than a 'hold', and prefers BP and BG Group in this sector. 'Clearly there is an opportunity for this view to change in the event Shell can demonstrate the same operational improvements we have witnessed with BP whilst also progressing its portfolio of large projects not least of which is Gorgon,' the broker said.CSR, which makes chips for Bluetooth and Global Positioning System (GPS) devices, said it expects to post fourth quarter revenue of between $180m and $200m, prompting Cazenove to crank up its full year sales forecast from $750m to $800m.Meanwhile, RBC Capital Markets noted that 'the [revenue] guidance for Q4 leaves our forecasts at the bottom of the range and we remain positive on a company clearly gaining market share.''The move to mass production of CSR9000, which includes Wi-fi, is a very positive development for CSR, although progress will still need to be made on an integrated rather than modular solution, in our view,' the broker added.