Mindful Money’s Monday share tips: GKN, ITV, Persimmon & William Hill

23rd February 2014

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Having become something of a global economic barometer of late, investors will be keen to hear what sort of shape engineer GKN is in when it reports its full year results on Tuesday writes Philip Scott.

The company’s third quarter update saw booming commercial aerospace and resurgent demand from car-makers in China and North America which aided performance notes Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

He says: “Looking ahead, recent volatile North American weather could have temporarily hindered auto sales, whilst a recent warning from Rolls Royce potentially raises nerves regarding GKN’s own military aerospace sales.”

Following a 12 month share price rise of 55%, full year pre-tax profit is predicted to rise by 4% to £518m, with prior analyst opinion, buoyed by expected ongoing global economic recovery, denoting a ‘strong buy’.

Tuesday also sees house builder Persimmon, 65% ahead over 12 months, report its fourth quarter numbers. Prior to the update, brokers at JP Morgan Cazenove have reiterated an ‘overweight’ recommendation on the group while analysts at Jeffries and Deutsche are calling the stock a ‘hold’, as is Sheridan Admans, investment research manager at retail stockbroker, The Share Centre.

He says: “The momentum for the house builders continues and Persimmon has now reached the pre-crisis highs once again. Investors will expect to see increased levels of home sales and higher average prices. Going forward, the acquisition of more land banks and plots for development will be important.

“However, with the recent wet weather, it will be interesting to hear management’s take on this, whether it has affected footfall, slowed down construction and the potential political stance on construction of homes on flood plains.”

Shares in industrial chemicals group Croda International may be down  by 2% over 12 months but Goldman Sachs recently reaffirmed its ‘buy’ recommendation on the stock. The group is keen to buy into new technologies, introduce more specialist products and invest in niche markets in order to boost growth says Admans, who for his part, rates the firm a ‘hold’.

He says: “Recent results have been slightly disappointing so investors may be wary of these results. Currency movements and a weakness in the European automobile market and crop care business have continued to impact the company.”

Broadcaster ITV has enjoyed a 70% share price hike over the past year and on Wednesday it updates the market with its full year results, where its management’s transformational plan is likely to be a primary subject of attention.

Admans, who rates the shares a ‘buy’, says: “The share price has maintained its outperformance over the last year as the group’s recovery continues to impress. Investors will be hoping that the company is continuing to see signs of improvement for advertising rates. Other areas to concentrate on will be the studio business and the acquisitions that have been made throughout the past financial year. Although much of the cost savings have been achieved there may be a chance to squeeze out that little bit more.”

Bowman adds: “The rebalancing of the business towards non-advertising lies central to the plan. Revenue expansion, driven by growth in Pay & Interactive and the success of such shows as Downton Abbey for its Studios business is likely to be reported. Hopes for a further special dividend currently persist. Full year pre-tax profit is forecast to increase by nearly 22% to £564m, with analyst opinion ahead of the news currently pointing towards a ‘buy’.”

In British American Tobacco’s fourth quarter results on Thursday, investors will be keen to see if it can continue to grow profits on higher prices to combat falling volume sales. Over 12 months the shares are off by 9% but Citigroup and Berenberg Bank analysts have reaffirmed ‘buy’ recommendations, reflecting the overall market sentiment towards the business.

Admans, however is calling the stock a ‘hold’, and notes that in the update, particular interest will be paid to its e-cigarette products and tentative signs of them combating the fall in stick volumes. He says: “Investors will be keen to see it profits and revenues have suffered any downward pressure on growth from increasing regulatory restrictions, adverse exchange rates slowing growth in emerging markets.”

Friday sees bookmaker William Hill, off 6% over 12 months, publish its full year results. Goldman Sachs is bullish towards the business having just upgraded its recommendation on the stock to a ‘buy’.

Admans, who also has the group labelled a ‘buy’ says: After its statement in January, investors are expecting the company to report slightly improved full year results. Revenues are expected to rise despite losses, as some sports results, particularly soccer, went against them. Investors will be looking for encouraging updates of its expansion in to the US and Australian markets, as well growing adoption of its online services.”

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