Portfolio

Broker tips: Craneware, Spectris, BP

By Iain Gilbert

Date: Monday 04 Mar 2024

Broker tips: Craneware, Spectris, BP

(Sharecast News) - Analysts at Berenberg lifted their target price on software firm Craneware from 2,300.0p to 2,600.0p on Monday, noting that strong momentum had seemingly continued throughout the first half of its trading year.
Berenberg said Craneware's interim results were in line with the company's trading update in January, with the board remaining confident about the accelerating growth momentum and a return to double-digit growth in the near term.

"We think now is the time to gain exposure to this high-quality software business with highly attractive end-market dynamics. We anticipate that Craneware will be able to achieve this growth due to 1) the improving end-market dynamics, 2) the strong value proposition of the cloud-based Trisus platform and 3) the opportunity from integrating third-party solutions," said the German bank.

Berenberg, which reiterated its 'buy' rating on the stock, also highlighted that these third-party applications drove 'other' revenue to $5.6m in the first half, up from $1.1m in FY23.

"Craneware trades on 29.5x FY24 P/E and 25.7x FY25 P/E, and we forecast it to deliver an 11.5% EPS CAGR in FY23-26," added Berenberg.

Analysts at JP Morgan raised their target price on instrumentation and controls group Spectris from 2,900.0p to 2,950.0p on Monday, but noted that the group's full-year results had left it with "little to get excited over".

JP Morgan said Spectris' full-year results pointed to "a cautious start to the year" and one that will be more reliant on a stronger second-half recovery, with orders ending the year down 5% on a like-for-like basis and the group not expecting orders in key end markets to recover until H2. This news pushed the shares down 7% since the news and 11% year-to-date.

"We update our numbers which decline circa 6%, mainly reflecting the Red Lion disposal, and we continue to see risk to consensus earnings, unless order intake picks up significantly in the coming months," said JPM. "Moreover, with the portfolio rationalisation complete, the margin expansion story less exciting from here (in our view) and uncertainty over order intake, we see less scope for positive news flow (outside potential M&A) in the coming quarters."

JP Morgan, which reiterated its 'underweight' rating on the stock, added that its increased price target principally reflected the business' improved cash from the Red Lion disposal.

Jefferies upgraded BP to 'buy' from 'hold' and lifted its price target on the stock to 570.0p from 520.0p.

The bank expects the stock to continue to close its valuation gap versus peers, supported by a greater focus on distributions, reduced capex risk and relatively conservative consensus earnings growth expectations.

It also noted that at the time of its fourth-quarter results, BP had "significantly" improved its financial frame by increasing the percentage of free cash flow allocated to shareholder distributions, increasing longer-term visibility for its quarterly buyback programme and tightening its capex guidance.

"On our numbers, the current distribution level ($1.75bn/quarter) can be covered by organic free cash flow down to a $70/bbl oil price," Jefferies said, as it also pointed to potential for a further buyback acceleration in the second half.

"Under both our macro assumptions and strip prices, BP should be able to step up its buyback in 2H24 to $3bn/quarter (from $1.75bn/quarter), which would result in total yield growing to 14.5% (from 11.6%), by far the highest in the sector after Equinor (which is unsustainable).0.

Jefferies also pointed out that consensus was showing an acceleration in H2 but only to around $1.9-2.0bn/quarter.

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