Broker tips: Pearson, Diageo, Whitbread

17th Apr 2015 12:31

Pearson's stock rebounded slightly on Friday after a heavy drop the previous session, though Westhouse Securities still recommended investors to 'sell' shares of the publishing group.Westhouse said it sees "scope for further share-price weakness". Thursday's news that Los Angeles' second-largest school district, LAUSD, is cancelling a $1.3bn education project based on Apple's iPad using course material provided by Pearson hit shares on Thursday. "With these [LAUSD] reservations in mind we believe the group's current valuation looks stretched," the broker said.Canaccord Genuity has raised its target price slightly for Diageo, but said that Thursday's update from the spirits producer contained a "cocktail of small disappoints".The broker maintained a 'sell' recommendation, saying it sees no end yet to the downgrade cycle for Diageo. Canaccord lowered its earnings estimates for the Smirnoff and Baileys maker after third-quarter sales were "disappointing relative to our own and, we believe, consensus expectations in all regions except Africa".Credit Suisse has hiked its target price for Costa and Premier Inn owner Whitbread from 5,300p to 6,200p and kept an 'outperform' rating, saying the leisure group provides "long-term sustainable quality growth".The bank said that roll-out plans of the company's two largest chains underpin forecasts for operating profits increasing at a compound annual growth rate of 13% over the next five years, compared with the 7% average seen at its peers. Furthermore, Credit Suisse's "bullish assessment" of Premier Inn's potential to expand in Germany should help sustain growth well beyond 2020, it said.