Broker tips: BP, Autonomy, Carpetright

1st Feb 2011 12:08

Charles Stanley has maintained its 'hold' recommendation on oil giant BP after the fourth quarter earnings outcome was 'below expectations' by as much as 10%.BP's earnings amounted to $20.5bn in 2010 ($14.6bn: 2009) while all charges relating to the Gulf of Mexico (GoM) oil spill amounted to $40.9bn. Production for the year was 4% lower at 3,822 million barrels of oil equivalent per day.The broker notes that before the GoM tragedy last year BP's strategy for growth over the 2015-20 timeframe was centred on the Gulf, where it is the largest lease owner.While BP has made some solid strategic progress in other regions - such as Australia, the North Sea, Indonesia, Egypt, Iraq and Russia - "the Gulf faces a slow recovery in deepwater activity for all participants and further drilling delays are likely," says analyst Tony Shepard.Since the Macondo well was sealed in September, the share price has recovered strongly, but the broker keeps its 'hold' ahead of any strategic changes.In the light of Autonomy's 2010 results, Peel Hunt, which has a negative stance on the search software giant, says that forecasts for the current year look too high.Eagerly awaited results for year ended 31 December were "almost exactly in line with consensus," says analyst Paul Morland, following poor results in the second quarter and a warning that accompanied 'in line' third quarter results."Director-speak" from the company was bullish, but Morland is not buying it. Autonomy chief executive Dr. Mike Lynch said: "We believe the growth rates seen across our business lines in Q4 2010 projected forward provide a solid baseline on top of which our current record pipeline and 'commit' imply that current market expectations are conservative." Morland, on the other hand, believes the fourth quarter figures confirm "a sharp slowdown in the second half and the risk to 2011 estimates is on the downside even though the company continues to claim that analysts are being too conservative." "Consensus forecasts for 2011 are for growth just above 10% which seems hard to justify in the light of today's results," Morland added. Peel Hunt is sticking with its below consensus sales forecast of $930m for 2011; market consensus prior to the fourth quarter 2010 figures was for 2011 sales of $965m. Although the broker says that Autonomy could see a bounce if a deal is announced in the first quarter, it gives the group a 'sell' rating and target price of 1,400p."It is difficult to for us to understand why a company that has seen its growth rate halve in the last six months should command a PE [price/earnings ratio] of close to 20x. We see downward pressure on 2011 forecasts and expect the shares to continue to underperform," Morland concluded. Carpetright's disappointing trading update reinforced finnCap's view that, for some time, the group's valuation has been based on an outlook for revenues that was "simply too optimistic."The specialist carpet and floor coverings retailer announced on Monday that in the 13 weeks ended 29 January, UK and Republic of Ireland sales declined by 5% with like-for-like sales down 7.7%.While UK margin remains on track, Carpetright said that International sales were down and expects profits for the 12 months ending April to be below the prior year.Analyst David Stoddart says that "to reflect the weaker-than-expected revenue performance," pre-tax profit forecasts for 2011 and 2012 have been reduced by 16.4% and 16.2% respectively.The broker keeps its 'sell' rating and cuts the target price from 485p to 420p.