Broker tips: Provident Financial, Spectris

by | Mar 2, 2021

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Canaccord Genuity cut its stance on shares of doorstep lender Provident Financial on Tuesday to ‘sell’ from ‘speculative buy’ and reduced its price target to 264.0p from 290.0p as it highlighted caution regarding claims.
Canaccord said it was unusual that PFG had not issued a trading update in respect of FY20, with the results delayed until April. In the absence of clarity on the company’s actual fourth-quarter performance, Canaccord said the target price cut was justified by a number of factors.

It pointed to downside risk to Vanquis Bank FY21 and FY22 forecasts. “The third ongoing UK national lockdown since mid-December is likely to have pushed out our expectation for a recovery in new customer bookings and average receivables balances,” it said.

The broker also said growing claims problems at the consumer credit division (CCD) are likely to compound scale issues.

“It is unlikely that CCD will ever return to meaningful profitability, in our view,” it said, adding that the outlook is further hampered by what appears to be a growing claims issue and “potential liability”.

Analysts at Berenberg raised their target price on instrumentation firm Spectris from 3,460.0p to 3,505.0p on Tuesday, stating the group’s turnaround efforts appeared on track to pay off.

Berenberg said a Spectris share price of more than £28.0 had historically been a “strong signal” to take profits. However, the analysts stated this time was “different”, with the turnaround now in “full swing” and starting to bear fruit, in its view.

The German bank pointed out Spectris’ portfolio reshaping was “progressing well” and margins were poised to trend higher, while also highlighting that a £200.0m buyback had been announced and the group still has never had more balance sheet optionality than it does it present.

“We upgrade our EPS estimates by 5-9% today, but are optimistic of further earnings momentum over the next 12 months,” said Berenberg, which also reiterated its ‘buy’ rating on the stock.

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