Broker tips: Greencore, AstraZeneca, Tullow Oil

20th May 2014 11:57

Greencore, the manufacturer of convenience foods, delivered a 'good' first half result, with a strong 26 per cent increase in like-for-like sales at its Convenience Foods unit in the US, and there is increasing visibility on growth next year, Investec analyst Nicola Millard told analysts in a research note. In particular, there was an improvement in margins at the foods unit, including some improvement from low margin UK businesses. Nonetheless, comparatives for revenue growth will get tougher as the year progresses, especially in the fourth quarter, depending on the weather. The increased visibility is a result from the US developments already announced but also of a new business win at Northampton, starting next year. As well, the group will be extending its food-to-go site at a cost of £30m. Yet that will not increase expectations for net debt given that it will be funded asset disposals scheduled for the second half of the year. On the basis of all of the above the broker has lifted its forecast for profit before tax (PBT) this year to £66.2m from £65.5m and for next year to £75.2m to £76.8m.As a result, Investec increased its price-to-earnings ratio -based price target to 278p from 273p and, given recent weakness in the share price, upgraded the stock to 'buy' from 'add'. Citigroup has urged investors to buy takeover target AstraZeneca after it turned down rival Pfizer's latest bid.Citi has added AstraZeneca to its Citi Focus List Europe, saying it is worth £49 a share following its rejection of Pfizer's "final" £55 per share offer.AstraZeneca's shares endured a record intra-day decline after its decision and were trading 54.5p off at 4233p by 10:38 in London.Pfizer had little scope to change its mind and make a higher offer before a deadline of next Monday due to strict takeover rules, analysts said.But Citi highlighted its report in November saying AstraZeneca's line-up of early to mid-stage oncology drugs was extremely under-valued.It also noted that its 2023 revenue forecast of $31bn, against a consensus of $28bn, was still materially below AstraZeneca's internal forecast of $45bn."We therefore add 'buy' rated AstraZeneca to the Citi Focus List based on our extensive previous analysis of its fundamental value drivers," the broker said.In a research note issued on Tuesday analysts at Credit Suisse lowered their price target on shares of oil exploration group Tullow Oil despite the lower-risk drilling plan on which the company is embarking on this year and next.Amongst the factors which motivated its decision are the recent appreciation in sterling (to 1.65 from 1.60), a string of unsuccessful well results (Emong and Ekunyuk in Kenya, Tapender in Mauritania, Butch East in the North Sea) and changes to future drilling plans (in Mauritania).The above will only be partially offset by positive changes to its macroeconomic forecasts, for the 2014 price of Brent oil more particularly. The Swiss broker also modified its estimates for the company out beyond this year to reflect recently announced disposal plans. On the plus side of things, Credit Suisse highlighted that the drilling plan which had been programmed for this year and the first half of 2015 looks to be lower risk (fewer expensive frontier offshore wells), the fact that it also targets various play types in the offshore (eg Gabon) in more tax-advantaged areas for exploration (eg Norway) and perhaps a more cost conscious approach and/or simply a reflection of the disappointing drilling track-record in the Late Cretaceous of late. Regarding moves by the firm to reshape its portfolio of assets, the intention to monetise its North Sea assets makes sense to these analysts. However, it would be better if the sale of its stake in the TEN development were carried out in whole with its other shareholders, if possible, instead of separately. The price target on the stock was lowered to 945p from 1,000p, and the 'neutral' recommendation maintained.AB