Broker tips: Smith and Nephew, Invensys, Prezzo
Goldman Sachs has downgraded its rating on Smith and Nephew to 'sell' from 'neutral' and cut its price target to 530p from 710p, saying it expects the medical devices firm's earnings shortfall to accelerate over the rest of 2008.
Pressure will come from slower sales growth of trauma and hip treatments and from launch costs for wound therapy, the broker said.
JP Morgan has lifted its price target on Invensys to 335p from 295p, ahead of the engineer's full year results on May 15.
JPM, which keeps its 'underweight' rating on the stock, said that 28p of the rise is accounted for by £95m the company received from a settlement with the London Underground operator Metronet.
Signalling work that Invensys had been contracted to undertake was rescheduled after Metronet went into administration last year. Invensys received £95m from French engineer Bombardier as part of the settlement.
JPM said it was looking for sales of £585m in Invensys' full year results, as well as operating profit before restructuring and exceptionals of £80m and net income of £115m.
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It said it was raising its 2008 earnings per share estimates by 31%, mainly due to the Metronet settlement and its 2009 estimates due to updated foreign exchange rates and higher margins in rail following the group's positive guidance on April 1.
The broker said it was keeping its 'underweight' rating on the stock because it saw less growth potential than the average for the sector.
Panmure Gordon has cut its rating on Prezzo to 'buy' from 'hold' after the Italian restaurant chain's share price surged following news of an approach that may lead to an offer.
Prezzo gained more than 20% after it informed the market of the approach late yesterday.
Panmure, which keeps its 60p price target on Prezzo, said that yesterday's spike brought Prezzo's share price to a price/earnings ratio of 13.8, the price at which it could be expected to sell for.
