Broker tips: Premier Foods, Burberry, Informa
By Iain Gilbert
Date: Tuesday 27 May 2025
(Sharecast News) - RBC Capital Markets downgraded Premier Foods on Tuesday to 'sector perform' from 'outperform' but kept its price target on the stock unchanged at 220.0p.
"We were a bit torn when making this decision," said RBC. "Premier Foods has done an outstanding job resolving a number of existential problems and has evolved a reliable business model. This has taken a while, but we feel that the share price now reflects these virtues, and so downgrade our rating to sector perform."
The Canadian bank updated its forecasts following Premier's full-year results, cutting its 2026 adjusted diluted earnings per share estimate to 13.90p from 14.20p to reflect an increase in guided finance costs in 2026 as a result of a low coupon bond being refinanced.
RBC said it was "enthused" by the news that Premier was set to increase its capital expenditure, from £41.0m in 2025 to a guided £50.0m in 2025 and, it expects, thereafter.
"When we visited a Mr Kipling plant last year, we were struck by just how much opportunity there is to deploy technology further...and this, we understand, is one of Premier's more technologically sophisticated plants," it said. "We believe that this will help underpin margins in future. Even with this elevated capital expenditure, we forecast net debt to decline to zero within two years, assuming no acquisitions. This is not the way management sees it playing out, with the prospect of something larger following the successful acquisitions of Spice Taylor and FUEL 10K. We're ambivalent about this.
Barclays upgraded Burberry on Tuesday to 'equalweight' from 'underweight' and hiked its price target on the stock to 1,000.0p from 720.0p as it said key concerns around the dilution of the brand equity now appear less likely to materialise.
Barclays said it was updating its estimates following the reporting season and upgrading the name for two main reasons. Firstly, the bank said it thinks the company's high-end brand positioning was no longer at risk.
Barclays turned 'underweight' on Burberry last year as it was worried that the lack of a disciplined full-price strategy, the markdown initiatives, high exposure to outlets and potential change of strategy from the new management could put the brand's high-end luxury positioning at risk. However, it noted that over the past few months, these risks don't appear to have materialised.
"The markdowns activity that took place in November 2024 didn't seem to dilute the brand image. The new brand strategy focusing on Burberry's core offering (outerwear/ scarves) is more in line with the brand's DNA and the most recent marketing campaigns and fashion shows seem to be having better tractions as flagged during the May-25 conference call (the brand has reached its higher level of brand desirability and brand affinity in the past three years - Kantar metrics)," it said. "Even if it is still early to gauge whether the new products will translate into a success when they reach the stores in calendar H2, we think that navigating a phase of markdowns without damaging the brand equity is already a positive."
Secondly, Barclays said that after turning loss-making in H1-25 at the EBIT level, the brand returned to profit in H2-25 and should see further EBIT improvement in FY-26.
"The higher amount of cost savings announced should also provide some cushion in the event of additional macro headwinds," Barclays said. "We keep in mind, however, that the brand transformation remains at an early stage and that top-line growth could remain negative in the short-term."
Analysts at Berenberg lowered their target price on publishing and exhibitions group Informa from 1,070.0p to 930.0p per share on Tuesday but said the group was still "standing strong".
Berenberg said Informa's share price has "suffered" recently on investors' concerns about the potential effects of an economic downturn and US funding cuts to academia.
The German bank noted the "cyclicality and structural growth potential" of Informa's B2B events division, and assessed the impact that potential cuts to US government university funding could have on its Taylor and Francis subsidiary.
"We conclude that the B2B events sector is less cyclical than investors think, and that the impact on T&F should be limited," said Berenberg, which reiterated its 'buy' rating on the stock despite dropping its target price on the shares.
With the shares trading on a CY25 price-to-earnings ratio of 14.6x, for a 10% earnings per share compound annual growth rate over FY24-28 when including buybacks, Berenberg views Informa's current valuation as "an attractive buying opportunity".
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