Broker tips: Halfords, Pendragon, Carluccio's

8th Oct 2009 13:03

Thursday morning's second quarter trading update from car and bike parts seller Halfords is likely to trigger full year earnings upgrades of around 8% or 9%, Singer Capital Markets reckons.Halfords' management said it expects to beat half-year consensus expectations of a pre-tax profit of £54.5m with a figure somewhere between £59m to £61m. Singer's estimate was ahead of consensus at £56.7m but below the new guidance range.Prior to Thursday's statement the consensus forecast for fiscal 2010 profit before tax was £97.3m 'and we would expect market expectations to nudge closer to a range of £104m-£105m on the back of this very solid start to the year, and on guidance that profit growth in H2 [the second half] is also likely' Singer said. Despite this, the broker is retaining its 'fair value' recommendation on the stock while its 275p target price, well below the current trading level, is under review.Panmure Gordon has turned bullish on Pendragon after holding a meeting with Trevor Finn, the car dealer's chief executive officer.The broker believes that strategically Pendragon intends to focus on leveraging off its existing assets, where it has 'very good exposure to large scale volume brands such as Ford and Vauxhall', and to concentrate on driving debt down to around £200m over the next two to three years. 'Acquisitions clearly look to be off the agenda,' Panmure Gordon believes.With the shares having fallen back below 40p from their 52-week high of 45p achieved in mid-August, Panmure Gordon has switched its recommendation from 'hold' to 'buy'.As the share price of restaurateur Carluccio's approaches Charles Stanley's price target of 100p the broker has switched its recommendation on the stock from 'buy' to 'hold', despite Carluccio's indicating full year profits will be ahead of expectations.Although performance this year has been good, 'future prospects appear mixed with additional staff costs to suffer, GBP [sterling] currency weakness against the €uro and unemployment uncertainty,' the broker reckons. The weakness of sterling is a particular worry for a group that sources many of its raw materials from Italy.Nevertheless, the broker has 'nudged up' its full year profit before forecast to £4.5m from £4.3m previously to reflect the additional central cost savings achieved.The price target of 100p has been left unchanged.