Broker tips: Thomas Cook, Experian, JD Sports

16th May 2011 11:35

Nomura has downgraded its forecasts for tour operator Thomas Cook as continued tension in the Middle East and North Africa (MENA) region and tough trading in the UK will likely affect earnings for the full year. While the group reported a first half operating loss of £166m broadly in line with Nomura's forecast of £170m, the year-on-year (y-o-y) difference was £36m worse, given the later timing of Easter and the impact of the MENA situation. While European businesses are performing better y-o-y, the UK - which accounts for 30% of earnings before interest and tax (EBIT) - is having a tough time with losses up £42m. The Japanese broker reduces its 2011 EBIT estimates by 5%.The target price falls to 235p, from 250p, but a 'buy' rating is kept.Credit Suisse revises up its forecasts at credit checking firm Experian ahead of the group's full-year result due on Wednesday to reflect the impact of the recent Computec acquisition and foreign exchange moves.The broker estimates revenues of $4,218m for the year ended 31 March, pre-tax profit of $959m and benchmark earnings per share (EPS) of 68.8 cents. 2012 and 2013 EPS estimates are raised by 4%, prompting a target price upgrade from 820p to 860p.However, a 'neutral' stance is kept.FinnCap raises its target price for retailer JD Sports Fashion saying that the group is "relatively undervalued" after a tough year for the industry: "we derive a level of reassurance from the company's recognition of the situation," the broker said.2011 results were better-than-expected, with pre-tax profit of £81.6m comfortably beating finnCap's forecasts of £78m. Revenues of £884m were £30m ahead of estimates.However, net sales during the eight weeks to 26 March declined by 1.2%, reflecting the VAT change "which, on its own, reduces the group's profit base by £16m," said analyst David Stoddart.Even so, the target price is increased from 1,125 to 1,175p, and a 'buy' is kept.---BC