Broker tips: WPP, Standard Chartered, Barclays

4th May 2010 12:58

Panmure Gordon has raised its target price for advertising giant WPP Group though its praise for the group's first quarter performance could not be described as gushing.Panmure Gordon rated the first quarter showing as no more than "reasonable", with the key positives from the update being upgraded margin guidance and the board's confidence on profitability. New net business and the pace of debt reduction so far this year are also encouraging.The target price has been increased from 600p to 800p. The broker's "buy" recommendation has been maintained.Nomura Securities is also a fan of the stock. It has reiterated its "buy" recommendation" and increased its full year organic revenue growth forecast from 1.2% to 3.0%. The earnings before interest, tax and amortisation (EBITA) margin forecast is nudged up to 13.1% from 13.0% which results in the earnings per share (EPS) forecast for the current year moving up from 52.4p from 53.8p."Our 2011 EPS forecast goes up from 58.2p to 58.8p," said Nomura analyst Colin Tennant. The price target remains unchanged at 750p.Standard Chartered is Charles Stanley's favoured stock in the UK banking sector, a view that will only have been reinforced by Tuesday's morning's upbeat trading statement."This was another positive trading update from Standard Chartered who, despite margin pressure, has enjoyed a strong start to the year with a record quarter in terms of both profit and income," said Charles Stanley analyst Nic Clarke, adding that the bad debt position also seems to have improved in the first quarter of 2010."The performance of the Wholesale Bank remains strong but, as in the Q1 2010 [first quarter 2010], we would like to see an improved share of group profits from Consumer Banking in 2010 as it represents better quality earnings," Clarke said.The broker has retained its "accumulate" recommendation.The first quarter performance by Barclays was a disappointment to Nomura Securities but the Japanese broker is sticking with its positive rating for the UK banking giant.Revenues at the investment banking arm Barclays Capital were lower than Nomura had been anticipating though this was partially offset by lower than expected impairment charges. Underlying profit came up some 15% short of Nomura's expectations and as a result it has trimmed its longer term earnings estimates.The broker remains bullish on the sector and that includes Barclays. "At a valuation of 1.0x our estimate of end 2010 book value, we regard the shares as attractive," Nomura analyst Robert Law asserts."We would argue the group's longer term RoE [return on equity] is likely to be above UK peers and over the cost of capital. However, short term momentum was disappointing compared with strong expectations and relative to performance from US peers. Consequently, while we continue to see value in the shares longer term, short term momentum appears to favour banks with greater leverage to improvement in credit costs," the broker concludes.