Broker tips: FeverTree, Future, Spirax Group
By Iain Gilbert
Date: Friday 09 Aug 2024
(Sharecast News) - Citi cut its price target on Fever-Tree on Friday to 950.0p from 1,115.0p citing slight model changes and an adjustment to its price-to-earnings valuation method.
"Poor weather across much of Europe, particularly in June is likely to have tempered H1 momentum for Fever-Tree," it said. "While US trading is expected to have been resilient and Rest of World should see a strong rebound on soft destocking comps in Australia, the tougher backdrop in Europe leaves our H1 OSG estimate at +2.1%."
Looking ahead, Citi said it sees better weather across Europe in July as supportive for current trading, while ongoing tailwinds from 2024 pricing and lower freight costs are likely to fall more heavily in the second half.
Citi also reiterated its 'neutral' rating on the stock.
Canaccord Genuity downgraded Future on Friday to 'sell' from 'hold' following a strong share price increase of around 100% from the lows.
Canaccord, which did hike its target price on the stock from 660.0p to 733.0p, said the valuation and risk/reward outlook were "mismatched".
"With the macro environment increasingly uncertain, GoCompare at peak growth/margins, US advertising peer updates showing some softness and our analysis around traffic data suggests it remains negative year-on-year," it said. "Consensus estimates currently have Future returning to growth in H2 FY24 and beyond, yet we believe is overly optimistic."
It noted that consensus expectations have Future growing group revenues by 3.5% in H2, followed by 2.5% in FY25. However with the macro environment looking increasingly uncertain, weak peer updates, negative traffic data and GoCompare at peak growth, the Canadian bank believes this could be "a tough ask" and said the risk of Future downgrades was increasing.
Analysts at Berenberg slashed their target price on engineering firm Spirax Group from 9,800.0p to 8,150.0p on Friday following the group's "slightly underwhelming" set of interim results.
Berenberg said the group's downgraded guidance for 2024 and the implications for 2025 were of great importance. In addition, Spirax's interim report included some strategic updates and refinements, which, in its view, while mostly already known, included some incremental areas of focus implying to the analysts that internal operational effectiveness, geographic business exposure trends and strategic execution were worse than it had considered in its "cautious initiation note" earlier in the year.
Berenbeg, which reiterated its 'hold' rating on the stock, said the challenges confronting the business did not appear to be much closer to resolution, leaving it to remain cautious on the stock going forward.
"While we acknowledge that our earnings per share revisions probably get us closer to the bottom for this cyclical low, with improvements in semiconductor and biopharm to play out on a 12-month view, our concern from our initiation remains: that the business faces strategic and operational challenges that have not been fully appreciated by consensus, or at least have been confirmed at the results by management as being of a magnitude that we had not envisaged, perhaps exacerbated by the incremental cyclical slowdown in both China and the US," said Berenberg.
"With a lot to work through for management, valuation at 27.1x 2024E P/E and 19.9x EV/EBIT remains a barrier to our becoming more positive considering the current returns profile and extended time frame for recovery."
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