Broker tips: Fevertree, LSE Group, Mitchells and Butlers

28th May 2024 12:02

(Sharecast News) - Goldman Sachs downgraded Fevertree to 'sell' from 'neutral' on Tuesday and cut the price target to 1,050p from 1,075p.

The bank said it expects the posh tonic maker to deliver 6.2% reported sales growth in FY24, below consensus at +7.3% and company guidance at +8%.

"In light of moderating Nielsen data and ongoing Spirits demand normalisation, we expect +15.5% organic sales growth in the US, below consensus at +17%," GS said.

"We are also cautious on the UK growth (+0.3% GSe versus +1.9% consensus), where we note an ongoing softness of Fevertree in the off-trade and weak performance of Cocktail Bar channel."

Jefferies has hiked its target price for London Stock Exchange Group (LSEG) from 1,110p to 1,150p and maintained a 'buy' rating, saying it sees "clear upside risk to consensus".

The broker described 2024 as a "transitional year" for LSEG's equity story, with the company's diversified model reaping clear benefits

"Elongated sales cycles and customer cancellations are weighing on peers, but LSEG's messaging on subscription income trends is resolutely robust," Jefferies said.

"The initial rollout of its Microsoft-related product enhancements remain on track, supporting an anticipated top-line growth acceleration from next year. Meanwhile, record activity levels at Tradeweb and solid growth at LCH are providing valuable ballast."

Analysts at Deutsche Bank placed a 'buy' recommendation on shares of Mitchells and Butlers following the pub owner's latest set of interim results.

In particular, they highlighted the improvement in the balance sheet as the company closes in on its target for a roughly £140m reduction in its debt pile after de-risking its long-standing pension deficit.

On the operational side of things meanwhile, the company's like-for-like sales were growing faster than its costs.

Furthermore, the outlook for the latter had improved, despite the headwinds from the national living wage.

Due to those lower estimates for Mitchell & Butler's costs, Deutsche Bank analysts bumped up their estimate for its earnings before interest and taxes in FY2024 by 5% and that for FY2025 by 3%.

The valuation, they added, was "cheap" given that the shares were changing hands on 12.9 times their estimate for the 2024 price-to-earnings multiple for a 20% discount versus its tangible net asset value.