Broker tips: Intercontinental Hotels, Tui Travel, Pace

11th May 2011 12:24

UBS makes modest upwards revisions to its forecasts for InterContinental Hotels after the Holiday Inn owner's first quarter earnings figures came in ahead of expectations. However, the broker keeps its 'sell' rating, highlighting just mid-single digit growth in RevPAR (revenue per available room, a key metric for the hotel sector), and only a 1% increase in room growth during 2011.First quarter earnings before interest and tax (EBIT) exceeded the broker's estimates by some $14m. Nevertheless, 2011 EBIT forecasts are raised by a lesser $8m due to higher-than-expected costs in the Middle East, Japan and New Zealand, and some reversal of cost benefits from the first quarter.While a 'sell' is retained, UBS raises its target price from 1,050p to 1,080p.Credit Suisse keeps its 'neutral' rating on tour operator TUI Travel, but raises its earnings estimates after strong first half results.The broker said that company - which owns First Choice and Thomsons - reported a "solid first half performance" on Tuesday (driven by a £23m Canadian turnaround) and more positive-than-expected comments on the UK outlook.These factors have prompted Credit Suisse to upgrade its 2011 earnings per share (EPS) forecasts by 4% and target price to 240p (from 235p).Pace's shares took a tumble on Tuesday after the set-top box maker revealed that first quarter profitability was lower than it expected due to higher-than-expected input prices.While this has led RBS to make material forecast downgrades on the "clearly disappointing news", the broker keeps its 'buy' rating, saying that share price decline looks overdone.The broker makes a 28% cut to 2011 operating profit (to £103.3m) and a 14% downgrade to 2012 expectations. Additionally, the target price is almost halved from 237p to 125p.---BC