Broker tips: United Utilities, Chemring, Balfour Beatty

8th Nov 2012 11:03

Nomura has downgraded its rating for United Utilities (UU) from 'buy' to 'neutral', saying that the stock is now a fully valued take-out option.Analyst Jonathan Constable said: "We estimate that the shares are pricing in an acquisition in the next six months with a probability of one-fifth for each of UU and SVT [Severn Trent] (equivalent to a 36% probability of at least one of the two companies being acquired)."Credit Suisse reiterated its 'neutral' rating and 330p target price for defence contractor Chemring following The Carlyle Group's announcement last night that it will not be making an offer for the company. The broker said: "We see slim chance of other bids in the short term."While the shares trade at just 7.8 times forward estimated earrings, Credit Suisse said it is staying cautious, saying that the stock is "clearly volatile given earnings uncertainty".Panmure Gordon has chosen to remain upbeat about prospects at construction firm Balfour Beatty in spite of the group tanking on Thursday after a profit warning. Panmure Gordon reiterated its 'buy' rating and 310p target price for the shares this morning."We have a positive stance on Balfour Beatty due to its broad international infrastructure positioning. It has a strong Professional Services presence which along with its Support Services operations complements its core Construction activity. Both these areas enhance the group margin potential, so improve the quality of earnings. The valuation is attractive."BC