Broker tips: M&S, Reckitt, Debenhams

10th Jan 2012 11:20

Panmure Gordon and Peel Hunt seem reasonably pleased with the latest statement from high street titan Marks & Spencer (M&S), but both brokers have maintained their hold ratings on the stock after leaving their profit forecasts unchanged.Panmure said that with its valuation models pointing at a share price of around 340p, at today's 316.5p level, the stock looks fairly valued for now. Panmure keeps a target price of 307p and maintains a hold rating, saying that while M&S may have an attractive dividend yield, it prefers to direct investors to sector peers Dunelm, Next or ASOS.Peel Hunt has said that while General Merchandise sales were weak, these were offset by a stronger performance in Food. "M&S was clearly more promotional and acknowledges gross margin investment (not yet quantified), although this is expected to be offset by yet further cost savings," said analyst John Stevenson. The broker keeps its hold rating and 350p target price.Household products group Reckitt Benckiser was given a boost on Tuesday morning by Credit Suisse, which reiterated its outperform rating on the stock."We believe that Reckitt's business model is still healthy and concerns over the sustainability of margins are overdone."The Cillit Bang, Durex and Strepsil maker is "attractively priced", according to the broker, which said that the stock is trading at 13.5 times 2012 earnings compared with the sector (US/European Food/Health and Personal Care) average of 16.5.However, as a result of a recent earnings per share downgrade - due to currency movements - the target price falls from 4,000p to 3,800p.Panmure Gordon has upgraded its rating on department store retailer Debenhams from sell to hold following the firm's better-than-expected Christmas trading statement, "particularly with regard to gross margin", it said.Like-for-like sales excluding VAT were flat in the 18 weeks to 7 January, compared with Panmure's -0.4% forecast. Debenhams also maintained its gross margin guidance for the full year."Positives include the recommencement of the store refurbishment programme, an excellent multichannel strategy, which is bearing fruit (online sales +34.8% in the period just reported), and what we thought was a good-looking spring/summer 2012 collection," said analyst Jean Roche.Panmure kept its target price of 60p.BC