Broker tips: Bridgepoint, Qinetiq, Compass Group
By Digital Look
Date: Wednesday 19 Mar 2025
(Sharecast News) - Bridgepoint gained on Wednesday after an upgrade to 'buy' from 'neutral' at Citi, which said the risk-reward looks attractive following recent underperformance.
Citi, which lifted the price target to 410p from 390p, said: "Bridgepoint shares have lagged peers and the sector YTD, which is a surprise, particularly following what in our view was a highly constructive FY24 update."
The bank cited strong operating trends and said it expects Bridgepoint to deliver fee-related earnings growth similar to peers, but despite this the shares are trading at an above-average discount versus history, which seems "unwarranted".
Berenberg slashed its price target on QinetiQ on Wednesday to 500p from 610p to reflect lowered estimates, but reiterated its 'buy' rating.
The bank said QinetiQ has been affected year-to-date by a slowdown in activity in its UK Intelligence, and US federal IT and product businesses.
"The net effect of new guidance issued following the group's recent profit warning is a circa 10% cut to FY 2026 earnings per share forecast, on our estimates," it said.
Berenberg noted that the shares have fallen 25% since the announcement and trade on 12x 2025 price-to-earnings for a 15% three-year EPS compound annual growth rate, which is a 35% discount to UK defence peers.
"It will take time for confidence to be restored, although the improved UK defence budget outlook and more focused US business help underpin our mid-term estimates," it said.
Compass Group slumped on Wednesday after BNP Paribas Exane downgraded shares of the catering firm to 'underperform' from 'outperform'.
The bank said it was turning more cautious on Compass as its proprietary data set on US employee layoffs has suggested that industry-wide client retention has deteriorated, particularly in the US Healthcare vertical.
"This challenges a major pillar of our industry thesis, and we turn cautious on contract catering," it said.
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