Broker tips: Unilever, Man, Invensys

5th Nov 2009 12:49

Hints during a conference call about price cuts in the pipeline may have contributed to a negative reaction to third quarter figures from Anglo-Dutch consumer goods giant Unilever on Thursday morning.Warren Ackerman of Evolution Securities said Unilever management indicated it would initiate price cuts of two or three per cent in the fourth quarter, versus a 0.2% reduction in the second quarter.Despite there being two trading days fewer in the fourth quarter than there were in the final quarter of last year, Evolution is still expecting Unilever to deliver a 4-5% increase in volumes in the three months to end-December.'Given a likely positive investor seminar in mid-November and lowered fourth quarter expectations, further weakness may be an interesting entry point to continue to play the medium term recovery of the stock,' the broker suggests. Better than expected interim figures from Man Group could see some upgrades to those full-year earnings estimates that are at the bottom end of the range, Singer Capital Markets reckons.Singer's own estimates are towards the top end of the range, and it remains a buyer of the shares.'The statement reiterates the significant improvement in private investor and institutional redemption rates with sales in the first half of $5.7bn. Investment performance has been good across the majority of hedge fund styles with the exception of managed futures (AHL) which has reported a 5% fall since the end of September,' Singer notes.The shares trade on a relatively high price/earnings ratio of 17, but Singer believes the earnings side of the equation is set to rise 'as a consequence not only of headline asset growth but operational gearing from a largely fixed cost base.'Barclays Wealth goes so far as to suggest that Man may have 'reached an inflexion point' with adverse sentiment towards the industry on the wane. 'The group's finances are robust, and recent trends suggest an improvement in hedge fund performance (specifically results from the US). We continue to find the group attractive relative to the sector,' Barclays Wealth analyst Roderick Wallace states.Half year results from Invensys were not enough to justify the high rating of shares in the engineering group, in the view of Charles Stanley, which remains bearish on the stock.'Optimists will hope that these results reflect the bottom of the cycle and that strong cash generation and an improving balance sheet might provide room for manoeuvre going forward. However, we remain concerned that despite efforts to reduce cyclicality, parts of the business (especially Invensys Operations Management, IOM) continue to be adversely affected by the sharp deterioration in corporate capex, a trend we see few signs of turnaround from recent economic data releases,' notes analyst Jeremy Batstone-Carr.The broker wants to see 'more concrete signs of turnaround' before upgrading its estimates. It maintains its 'reduce' recommendation on the shares.