Broker tips: Lloyds, Weir Group, Fidessa

3rd Aug 2015 13:35

(ShareCast News) - Charles Stanley downgraded Lloyds Banking Group to 'hold' from 'accumulate', citing tax and PPI headwinds.It also said that with the shares trading on a premium rating of 1.6x 30 June 2015 tangible book value, material near-term upside may be limited.However, the brokerage still sees a total return opportunity of over 15% from current levels on an 18-24 month view. It said that with dividend payments having resumed and management focused on pursuing a "low cost, low risk, customer focused" business model, there is strong potential for the company to become a solid income stock over the coming years.Charles Stanley said that as with the full-year 2014 results, the interim results have shown a good underlying performance but statutory profits were hampered by further significant legacy misconduct charges and other one-offs."The underlying profit improvement has again been mainly been derived from lower loan losses which could reverse in a more challenging economic environment," it said.The brokerage pointed out that she shares fell 3% in the day of the results despite the 6% underlying pre-tax profit beat, amid disappointment over the hefty PPI and other misconduct charges. Analysts at Investec upgraded their rating for Weir Group to 'hold' from 'sell' and kept a price target of 1450p.Investec analyst Thomas Rands said forecasts for the engineering group were updated off new management guidance which resulted in a 10% downgrade to its 2015 full year adjusted pre-tax profit.Rands said Investec continued to forecast an earnings recovery for financial year 2016 but it would be relatively limited.He said Weir Group was close to the bottom of the earnings downgrade cycle prompting an upgrade, but Investec could not upgrade to 'buy' as it expected Weir's oil & gas division to recover slowly.While first half trading was moderately better than anticipated, oil and gas overseas input orders and minerals after market orders were both worse than expected, Investec said.It noted pricing pressure remained on minerals but volumes were currently strong enough to offset this. Analysts at Numis downgraded their rating for trading platforms company Fidessa to 'hold' from 'buy' after the company released its first half result.Shares in Fidessa plunged by more than 10% to 2,157p this morning after the London-listed company reported a 1.5% decline year-on-year in pre-tax profit to £19.4m.Numis reduced its price target for Fidessa to 2355p and warned the company's outlook was more troubling than expected.Analysts said end markets were undergoing a high degree of change which led to further closures and consolidations, and this would create headwinds in 2016."Our new numbers reflect increased attrition/slower revenue growth and also ongoing investment as management position Fidessa to capitalise on the degree of change in some end markets," Numis said in a note.While Fidessa could research potential ideas of interest in the fixed income market, Numis said it would not yet model the revenue of cost impact of that.