Broker tips: Tesco, GlaxoSmithKline, Reckitt Benckiser

6th Oct 2009 13:04

JPMorgan Chase reckons there is scope for upward revisions to earnings forecasts at Reckitt Benckiser, driven by increased sales and improved margins.'We see room for positive earnings revisions from better top line and operating margins for the core business and potentially milder profit erosion in US pharma. Yet, the market does not seem to have taken notice as the stock trades just in line with peers,' the US bank notes.JPMorgan (JPM) has an 'overweight' recommendation for the shares and a price target of £33.The market seems to have had difficulty deciding what to make of the results from Tesco announced on Tuesday morning, but ETX Capital is convinced cracks are beginning to appear in the supermarket giant's money making machine.'Despite a net first half profit in excess of £1bn and a hike in their dividend, the much lauded US expansion has yet to prove profitable,' ETX analyst Manoj Ladwa notes.With the supermarket business losing share to Sainsbury (due to declare results on Thursday) and with declining food prices likely to put pressure on margins, Tesco may have to look at other areas 'if it is to offer growth and value to shareholders,' ETX reckons.GlaxoSmithKline's experimental kidney cancer drug Votrient has been given a unanimous endorsement by the US Food and Drugs Administration, removing some downgrade risk from the stock, broker Panmure Gordon believes.Panmure Gordon has reiterated its 'buy' recommendation and 1400p price target for Glaxo, saying 'the strong endorsement also sets the scene for upgrades if Votrient proves successful in larger cancer indications such as breast and lung cancers.'The broker's forecasts for Votrient are substantially risk adjusted, but on the basis the drug will hit the market in 2010 it is predicting revenues of £25m in 2010, rising to £100m in 2011 and to £400m by 2013.The shares are trading on a forward price/earnings ratio of 11.4, in line with the rest of the European pharmaceutical. 'Growth is not going to be easy and will be fairly low quality in the short term, with cost containment central to the thesis, but we expect the dividend yield of 5.2% to provide support,' the broker said.