Broker tips: Tesco, Schroders, FirstGroup

3rd Oct 2012 11:01

Seymour Pierce has retained its 'reduce' rating for supermarket giant Tesco after the group's first-half profits came in well below expectations.Tesco this morning reported a 15% drop in first-half profit before tax (pre exceptionals and property profits) to £1,497m, under Seymour Pierce's £1,603m forecast. Trading profits fell in the UK, Asia and in Europe, while US losses were worse than expected."The market was prepared for a decline in profits but this is a disappointing statement even in that context we believe," said analyst Kate Calvert.UBS has cut its recommendation for asset manager Schroders from 'neutral' to 'sell', saying that expectations are too high."We downgrade Schroders to 'sell' as we believe that expectations on flows and on capital returns have led the stock to re-rate vs peers while we remain cautious on both points," the broker said.Jefferies has reiterated its 'hold' recommendation for transport firm FirstGroup after the government's decision to cancel the West Coast franchise competition, adding that it will have an adverse impact on sector peers Go-Ahead and National Express.Delays in the franchising process are small negatives for Go-Ahead and National Express, the broker said, as they are shortlisted in the other live franchise contests: the Great Western, Essex Thameside and Thameslink franchises' timetables will likely be delayed as a result of the governmental reviews.BC