Broker tips: Tesco, Smith & Nephew, Spectris

13th Jan 2012 10:28

Analysts at Credit Suisse seem to be amongst those who were left somewhat traumatised by the carnage in retailer Tesco's share price yesterday. Credit Suisse has revised down their Tesco earnings estimates by 13% for 2012/13E (slightly less thereafter), which is very sizeable in the context of Tesco's hitherto almost unblemished past. Credit Suisse also tells clients that, "even though the plan could be precisely the short-term pain required for longer-term gain," they add that they also, "do not expect a share price catalyst soon."The broker is removing Tesco from the Credit Suisse Focus List and has cut its rating to neutral (from outperform) with a new 370p target price (from 500p). Investec may have made downgrades to its forecasts for Smith & Nephew, but the broker has maintained its buy rating on the medical devices giant.The broker is forced to cut the group's current-year earnings per share estimates by around 4% to take into around currency headwinds arising from a strengthening US dollar.Nevertheless, Investec remains a buyer of the stock "based on our view that underlying trading remains robust, that market conditions are relatively stable and that the rapidly degearing balance sheet should provide further upside."Investec has maintained its buy rating and 1,650p target price on instrumentation and controls firm Spectris after its full-year trading update showed that earnings were 5% ahead of the broker's forecasts.However, the broker does note that Spectris's statement offers little in the way of 2012 details other than that the outlook is uncertain but the company is well positioned. "Recent profit warnings from competitors leads us to be cautious short term, but we like this stock longer term and retain our target price, based on international peer multiples, and our buy recommendation," Investec said.BC