Broker tips: Pearson, Domino´s, Vedanta

3rd Jan 2012 13:16

In a research note issued this morning analysts at Credit Suisse have raised their price target on Pearson by 9%, to 1,175p, as the publisher remains their, "preferred long-term Professional Publisher for quality."Credit Suisse points out that shares of Pearson are now trading at a 5% premium to the sector average, at 14.2 times the estimated PE multiple for 2012, despite its current "cyclically depressed earnings."Analysts at Panmure Gordon are today reiterating their sell verdict on shares of Domino´s Pizza. This ahead of the company´s interim management statement expected out tomorrow. In particular, the broker believes that the company´s rate of sales growth will be weighed upon by "relatively tough comps and mild weather." Hence, it expects the company to report 3.3% like-for-like sales growth for Q4, below the 3.9% rate seen in Q3. As well, Panmure Gordon highlights how, "the stock now trades at 24,1 times its 2011 price/earnings ratio and at a Enterprise Value/EBITDA (operating profits) multiple of 14.1, supported by a 3.0% yield. For a stock we forecast to grow earnings by approximately 11% in 2012 we view this as too expensive. We reiterate our sell recommendation and target price of 350p."Credit Suisse is today reacting to news reports that Indian authorities have raised the export tax on all grades of iron ore from 20% to 30% putting further pressure on exports. Coupled with project delays in Brazil they now believe that iron ore prices may stay higher for longer.However, whereas companies such as Rio Tinto or Ferrexpo may benefit the opposite is true of Vedanta, as the company´s operating profits in terms of EBITDA (earnings before interest, taxes, depreciation and amortization) may be reduced by close to $150m as a result. This may complicate the company´s ability to meet some of its debt covenants in fiscal year 2013.AB