Broker tips: JD Sports, Convatec, Babcock
By Iain Gilbert
Date: Friday 27 Jun 2025
(Sharecast News) - Shares in JD Sports were rising strongly on Friday on the back of hopes of a rebound at Nike, following the American sportswear giant's results released overnight, with Shore Capital showing optimism about positive readacross for the UK retailer.
With Nike products representing a significant share of sales at JD, weaker US results at Nike have already been reflected in recent trading at the high street chain, with JD's North American like-for-like sales down 5.5% in the three months to end of April. However, while Nike's full-year revenues were down 10%, sales for its fourth quarter to end-May were comfortably ahead of market forecasts.
"While there is clearly still work to be done on Nike's recovery, the company expects an improving trend in the first quarter to just mid-single digit revenue decline. This is expected to be particularly driven by the challenging Chinese market which is expected to take longer to return to growth, while Nike sees better momentum in the US and Europe," said Shore Capital analyst David Hughes.
While the brand continues to struggle in its D2C business, the view on wholesale partners like JD is more optimistic, with an improving order book and growth in seasonal orders, said Shorecapital, which also noted that a return to LFL growth in the US should drive a re-rating in JD's stock..
"Overall, the double-digit sales decline for Nike has undoubtedly been a significant headwind for JD and there is still more work to do before the company sees a return to revenue growth and in continuing to clean the inventory position. However, with this update we do see early signs of an improving wholesale channel. Such an improvement in wholesale (particularly in the US) is key for JD's to see a return to American growth."
Analysts at Berenberg raised their target price on medical device firm Convatec Group from 310.0p to 335.0p on Friday as it pointed to "good momentum" ahead of the company's interim results.
Berenberg noted that Convatec's shares had "a strong first half", up 32% year-to-date, and have benefited from continued progress across all of its segments, as well as delays to the implementation of local coverage determinations in wound care.
However, the German bank noted that even with the re-rating in the shares, Convatec trades on an "undemanding" 12.0x FY26 enterprise value/underling earnings ratio, despite mid-teens earnings growth estimated for 2025-27.
"Looking ahead, the company's trading update on 22 May suggests momentum in the business is strong ahead of H1 results on 29 July," said Berenberg. "As a result, we could see further upside to earnings expectations as we move through the year."
Berenberg also reiterated its 'buy' rating on the stock.
Deutsche Bank downgraded shares of defence firm Babcock International on Friday to 'hold' from 'buy', saying it was pausing for breath, but lifted its price target on the stock to 1,115.0p from 965.0p.
The German bank noted that Babcock delivered full-year results in line with guidance in April, with double-digit organic revenue growth and a 50 basis point EBIT margin uplift during the year, something it called a "testament to strong operational performance".
"Reflecting this strength of delivery, management raised its medium-term EBIT margin guidance to 9% (previously 8%), keeping its mid single-digit organic growth and more than 80% OCF targets unchanged," DB said.
Deutsche Bank also noted that Babcock had launched a £200.0m buyback, saying this evidenced the transformed balance sheet offering capital allocation optionality.
DB also increased its FY26-27 earnings per share estimates by 4-9%.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN