Broker tips: Admiral, Diageo, Halma
By Iain Gilbert
Date: Thursday 05 Dec 2024
(Sharecast News) - Admiral shot higher on Thursday as Deutsche Bank upgraded the stock to 'buy' from 'hold' and lifted the price target to 3,020.0p from 3,000.0p saying it was becoming more positive on the wider UK motor insurance space, particularly for those that are larger players such as Admiral, and those that are more disciplined.
"With tailwinds to come through to earnings over 2024-2026 from UK pricing of 2023, along with improvements in the group's international businesses and the addition of the RSA policies in home and pet, we view the group as strongly positioned to keep growing the top and bottom lines," said the German bank.
Deutsche Bank also said Admiral was trading on a 2025 price-to-earnings ratio of roughly 13 times, versus a historic average closer to approximately 16 times, meaning that it sees "re-rating potential".
Jefferies upgraded Diageo to 'buy' from 'hold' on Thursday and lifted iits price target on the stock to 2,800.0p from 2,300.0p.
"Companies do not change overnight; however, we think that Diageo will start to look different as confidence in spirits growth increases and under a new, heavyweight CFO, where we see a renewed focus on growth, profit and cash," Jefferies said, noting that FY25 should be a trough year with recovery from FY26 onwards.
The drinks company will report H125 results on 4 February and Jefferies said its FY25 earnings per share estimate was mid-single-digit below conseunsis, largely due to adverse FX and lower associate income.
"We think the company could provide a new guidance framework of 3-6% organic sales and 4-8% organic EBIT growth, with an emphasis on stronger returns, effective from F27," it said. "This provides a cushion to absorb potential volatility around possible tariffs under Trump 2.0 and to build in F26 as a recovery year to rebuild credibility before hitting full stride."
Analysts at Berenberg hiked their target price on safety equipment business Halma from 2,450.0p to 2,700.0p on Thursday as it acknowledged the group's sustainable growth model was in action.
Berenberg previously hosted a fireside chat with Halma's chief executive Marc Ronchetti and chief financial officer Steve Gunning, the main focus of which was on understanding the company's sustainable growth compounding business model, which has delivered a 10-year 12% profit compound annual growth rate, and a 46th consecutive year of dividend growth.
The German bank said the group's corporate purpose, target markets, structural growth drivers and key enablers support a financial guidance framework that seeks to double earnings per share every five years and grow sales by 15% per year through organic and inorganic means, with strong cash flow from 20%+ operating margins supporting ongoing M&A.
Following Halma's "strong organic growth" at its recent FY25 interim results and "a clear strategy being executed well", Berenberg noted that the management team appeared enthusiastic about the opportunity ahead for investors.
"Halma trades on a 30.3x FY 2025 P/E and 23.6x FY 2025 EV/EBIT. While optically fully valued, Halma has demonstrated over many years an ability to deliver strong growth and excellent shareholder returns which we expect to prove attractive to many investors," said Berenberg, which reiterated its 'hold' rating on the stock.
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