With the market still drifting lower - although off its worst levels - a couple of broker recommendations are having a positive effect.
Next has added 60p to £22.69 after Citigroup punted the prospect of an acceleration in dividend payments and possible share buybacks . Analyst Richard Edwards has moved from hold to buy and lifted his price target for the retailer from £22 to £26, saying:
We forecast Next to deliver around +5% underlying earnings per share growth per annum, similar to its UK domestic peers; however, unlike its peers Next has an impressive return on capital employed of around 90%, driving around £400m free cashflow per annum.
We forecast that this strong cash generation will drive an acceleration in dividend payments and £200m per annum share buyback activity (adding around +5% to the underlying group EPS growth). In combination we argue that this offers investors the prospect of +10-15% total return per annum. [This] is sufficient to drive a buy) rating on the shares.
Elsewhere FTSE 100 aerospace electronics company Cobham has climbed 3.9p to 275p following news that Goldman Sachs had increased its price target from 210p to 270p. The bank said:
We believe large defence contractors are very vulnerable to cutbacks on new platforms. However, the electronics content of defence platforms tends to
increase over time, and electronics can also be retrofitted to old platforms.Cobham's chief operation officer, Andy Stevens, became chief executive on January 1, 2010. In 2010, he plans to review the group portfolio and explore further integrating legacy acquired companies. [There is a] transition risk but also upside risk.
