Wednesday tips round-up: AstraZeneca, AG Barr

28th May 2014 07:46

Shares of AstraZeneca continue to trade well above the price at which they were at before Pfizer came along - 37 pounds. However, it seems implausible that investors are still holding out on hopes of another bid coming through. Rather, it is probably a reflection of the ambitious growth targets which the company has set itself. Its Chief Executive, Pascal Soriot, is looking to grow revenues to more than 45bn dollars by 2023, versus 25.7bn dollars last year. That comes even as the company is set to face a "patent cliff" which will see some of the more important compounds which it markets lose patent protection. During the coming weekend management will attend an annual cancer convention on cancer care, in Chicago. It is due to present AZD 9291, a cancer drug which has received a favourable welcome Stateside and which some believe may make it to market sooner rather than later. The giant believes it can hit its targets without significant M&A, something which has not always held true in the past. Nothing is assured, after all this is Big Pharma. Hence, investors' main reason to hold on to the shares continues to be the dividend yield, currently at about 4 per cent. Hold, says The Times' Tempus. The fickle British summer means that soft drinks group AG Barr will be coming up against some tough comparables given the excellent trading conditions it enjoyed last summer, due to the good weather. However, its latest revenue figures show that sales have hardly skipped a beat since the three months ended in January, expanding at a 5.2 clip. Not only that, its revenues are growing faster than the rest of the market without having to cut prices or spend heavily on advertising. Furthermore, the company has been expanding the ranges for its water products and more traditional brands, such as Irn-Bru. As if that were not enough, broker Investec expects the firm to reach a positive net cash position over the next eight months and to generate free cash flow of £24m in the coming year. The latter means that here is scope for the dividend to outpace inflation in coming years. This is good as the stock is already trading at 22 times' forecast earnings, a premium to the rest of the sector. "The gains from here should be steady and the shares remain a hold," writes The Daily Telegraph's Questor team. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB