Broker tips: Insurers, ARM, Smith & Nephew

5th Feb 2013 11:35

Ahead of earnings season for insurance stocks, Nomura has reviewed its coverage on the non-life sub-sector, highlighting Admiral as its top pick whilst upgrading its rating for Direct Line and downgrading RSA.In a research report on Tuesday, Nomura said: "We are not expecting any major surprises, and expect a good set of results from all the companies." The broker believes that the UK non-life insurance sector offers good dividend yields among the Pan-European insurance category and "should lead to good total returns, and which we believe are supported by strong balance sheets and relatively more stable earnings streams."Strong growth in Licensing sales at chip designer ARM Holdings helped the company beat expectations in the fourth quarter, according to Investec. "ARM has proved again it is the standout play in the tech sector. Our recent move to 'hold' was predicated in the stock hitting our 900p target price which was based on our FY16E royalty scenario analysis. The upside beat on the licence performance should be enough to help the stock consolidate following its very strong run. At this stock price, the key will be on the sustainability of this licence level".With Smith & Nephew having reached Panmure Gordon's target price, the broker has downgraded the stock from 'buy' to 'hold' despite it remaining bullish for the group's long-term outlook.Panmure said that it expects the medical technology firm's full-year results on Thursday to be "largely positive" but doesn't think that the outlook statement will be as strong as consensus forecasts imply - consensus estimates are for 5.4% growth in 2013 revenues.BC