Broker tips: IMPs, Vodafone, M&S

8th Apr 2010 13:29

The share price of Imperial Tobacco has recently run out of puff, offering investors an attractive investment opportunity, according to Goldman Sachs."Over the past month, the stock has fallen 8% and now trades on P/E [price/earnings ratio] and EV/EBITDA [enterprise values/earnings before interest, tax, depreciation and amortisation] multiples lower than any other global branded European-based consumer staples company; this is despite offering an attractive growth and dividend profile," argues analyst Lucy Baldwin.The broker continues to see upside to consensus forecasts for fiscal years 2010, 2011 and 2012, with another €210m of cost synergies from the Altadis acquisition to feed through, while "the price environment remains generally solid".Goldman Sachs's 12-month price target of 2400p remains unchanged, as does its 'buy' recommendation.The recent strength of the US dollar against sterling has prompted UBS to upgrade its earnings forecasts for mobile phone giant Vodafone.Its earnings per share forecast for fiscal 2010 has been increased by 1% and forecasts for subsequent years have been raised by 4-7%, while the price target has been lifted from 130p to 150p. The broker retains its neutral rating on the stock.UBS remains concerned by Vodafone's "exposure to markets with poor structure in Europe, falling market share, and the prospects of a US slowdown." All of these issues could drag down underlying earnings, UBS believes.On the upside, there is the prospect of Vodafone starting to receive a dividend from its stake in US mobile phone operator Verizon Wireless from fiscal 2012. "Vodafone's dividend yield could rise to more than 9% if Verizon Wireless were to upstream all its earnings,' UBS notes.Bank of America Merrill Lynch thinks Thursday's trading update from Marks & Spencer (M&S) will not prompt investment analysts to rush to change their fiscal 2010 forecasts, though higher operational expenditure guidance may put some pressure on consensus forecasts for fiscal 2011."We remain concerned about M&S's food margin outlook given intense competition in premium food, plus we think M&S's international strategy will have to be clarified by incoming CEO [chief executive officer] Marc Bolland," Merrill Lynch analyst Richard Chamberlain said."We expect M&S to announce the results of its triennial actuarial pension deficit by the time of its full year results on March 25, which could lead to additional cash payments of £75-80mn each year for ten years," Chamberlain added.The broker is neutral on the shares and has a 380p price objective based on a discounted cash flow model.