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Broker Tips: ITV, Pearson, Melrose Industries

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  • ITV target price downgraded; consensus mixed
  • Empiric Student Properties upgraded to ‘Buy’
  • UBS raises Pearson to ‘Neutral’
  • Goldman Sachs raises Hiscox target price
  • Panmure raises Melrose Industries to ‘Hold’

ITV Plc (LON: ITV), the UK broadcaster and media company, last week posted full year results for 2021, featuring “an outstanding financial performance in 2021, with total external revenue growth of 24% and adjusted EPS growth of 40%”. With the company on track to at least double digital revenues to £750m by 2026, the company prospects look positive, even though the stock is currently trading at 79.01p, almost at the bottom of its 52-week trading range. On Monday, Barclays, JPMorgan and Credit Suisse all cut their target prices. Goldman Sachs also cut the target price to 94p (125) but raised the stock to ‘Neutral’ from ‘Sell’, while Bernstein upgraded the stock to ‘Outperform’ from ‘Market Perform’. Today, Deutsche Bank recommended ‘Hold’, on account of a risk of increased costs of ITV’s plans to make its streaming platform more compelling.

Empiric Student Properties (LON: ESP), a provider and operator of student accommodation in university towns and cities across the UK, weathered the Covid storm last year, with 1H growth of more than 40%. So far this year, ESP has suffered with the rest of the UK stock market, with -2.58% YTD but with a 1-year return of 15.35%. Now that student housing occupancy rates are almost back to pre-pandemic levels, ESP can look forward to long-term sustainable value and profitable growth. The stock is currently trading at 83.4p. Berenberg yesterday upgraded the stock to ‘Buy’.

Pearson (LON: PSON), the London-based education materials publisher, saw its share price recover on news of an increased dividend in May and of a £350m share buyback programme this year, launched on the back of a strong financial performance in 2021. The company said it is confident of further revenue growth, with adjusted operating profit, interest and tax expected to be in line with current market expectations for 2022. The stock is currently trading at 614.60p, a recovery of 7.6% on the 52-week low set last December of 571p, giving the stock a performance of 0.23% YTD and a 1-year return of -24%. UBS raises Pearson to ‘Neutral’ (‘Sell’), with a price target of 620p.

Hiscox (LON: HSX), the Bermuda-based insurance group, last week reported it was back in the black thanks to a five-year high in its underwriting performance, which helped turn a $268.5m loss in 2020 into a $190.8m pretax profit in 2021, despite elevated natural catastrophe losses. Investors were unimpressed, however, as the share price slumped more than 12% in two days, wiping out the gains made over the last two months. The stock is trading at 831.60p, a performance of -3.39% YTD and a 1-year return of -9.37%. RBC initiates Hiscox with ‘sector perform’, with a target of 1,000p, while Goldman Sachs raises Hiscox price target to 1,180 (1,150) pence, recommending ‘Buy’.

Melrose Industries (LON: MRO), the London-based buyout firm specialising in the manufacturing sector, narrowed its losses last year, despite headwinds from semiconductor chip shortages and Covid disruption. Its results were ahead of expectations, Melrose said, with stronger cash generation and net debt reduced from £2.83bn to £950m, though it struck a cautious note by not distributing cash from the sale of two of its businesses, Nortek and Brush. Investors sold off 23% on the news. The stock is trading at 109.35p, which is -31.6% YTD and at the bottom of its 52-week trading range. UBS cut Melrose Industries price target to 164p (181), with a recommendation to ‘Buy’, though Panmure raised Melrose Industries to ‘Hold’ from ‘Sell’, with a target price of 121p (110).

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

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