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Broker Tips: Rolls-Royce, Royal Mail, Rio Tinto

  • Citi raises target price for Rolls-Royce
  • Bank of America Merrill Lynch upgrades Royal Mail owner IDS
  • JPMorgan upgrades Rio Tinto to ‘Overweight’

Citi raises target price for Rolls-Royce

Citi has raised its target price for Rolls-Royce [LON:RR.] from 294p to 431p and increased its earnings per share forecasts by 27% in the short term and 52% in the long term. The bank expects an unwinding of working capital to aid cash flow in the near term, with sustained free cash flow of over 30p per share in the medium term, rising to 38p by 2028, which should be reflected in the company’s valuation. This follows analysts at UBS and Deutsche Bank increasing their target price to 400p last week, following an earlier upgrade by JPMorgan.

Rolls-Royce shares were trading at 299.59p at the time of writing, up 202% this year and 230% over the last 12 months.

Bank of America Merrill Lynch upgrades Royal Mail owner IDS

Bank of America Merrill Lynch has upgraded Royal Mail owner International Distribution Services [LON:IDS] to a ‘Buy’ rating from ‘Neutral’ and raised its target price to 335p from 275p. The bank noted that Royal Mail is progressing steadily following a deal with the Communication Workers Union and the company is winning back volume share, stating “We are encouraged by turnaround progress at Royal Mail and how the new CEO is putting his stamp on operations,”

International Distribution Services shares were trading at 269.10p today, up 23.9% this year and 28% over the last 12 months.

JPMorgan upgrades Rio Tinto to ‘Overweight’

JPMorgan has upgraded Rio Tinto [LON:RIO] to ‘Overweight’ from ‘Neutral’ this week noting its iron ore and free cash flow yield resilience. In a metals and mining sector review, the Bank noted “we believe emerging costs of carbon (both explicit & implicit) could drive structural shifts in certain subsectors (aluminium, iron & steel, coking coal) & offer significant opportunities for those miners positioned as: 1) low CO2 producers in high CO2 intensive sectors & 2) incumbents where restrictions could drive supply/demand tightening.”

Rio Tinto shares were trading at 5,527p today, down 5% this year and down 3.8% over the last 12 months.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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