Broker tips: Xstrata, Micro Focus, Stagecoach

7th Dec 2011 11:12

Credit Suisse has reiterated its outperform rating on mining giant Xstrata, saying that the company is a "relative winner in a fight for growth".While the broker notes that declining returns are a concern for the industry ("due to significant balance sheet expansion and high cost pressures"), Xstrata is seen to be well-placed in a sector geared up for growth."Through a combination of volume growth, structural reduction in the company's cost base and copper/coal exposure we expect XTA to deliver peer leading earnings growth and display the strongest margin improvement 2011-15," analysts said.A 1,700p target price is retained.Evolution Securities has kept its buy rating on business software firm Micro Focus International, saying that the company is a "cash monster" following the announcement that it is to return cash to shareholders.The firm announced today that revenues fell 2.6% in the first half, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 8.5%. It also revealed that it intends to return around $134.4m in cash by way of a B and C share scheme.Analyst Roger Phillips said: "With another 10% buyback still to be executed and consensus earnings per share [forecasts] moving sharply upwards for FY12, we see significant outperformance for the next six months."A 410p target price is maintained.Higher-than-expected earnings and lower net debt at Stagecoach has prompted Nomura to raise its target price for the travel group.Stagecoach reported earnings before interest, tax and amortisation of £111.6m in the first half, against Nomura's expectations of £109.5m. As such, the broker raises its current-year earnings per share forecasts from 24p to 24.2p, and ups its target price from 278p to 281p.Nomura maintains its buy rating on the stock saying while earnings are expected to be flat on a full-year basis, the firm should deliver strong earnings growth in the second half and next year.BC