Charles Stanley is leaving its full year earnings estimates for Halfords unchanged, despite the sluggish start to the new financial year made by the bike and car parts retailer.
“Halfords’ Q1 [first quarter] trading update was slightly weaker than expected at the sales level, but full year PBT [profit before tax] guidance has been maintained,” notes Charles Stanley analyst Sam Hart.
Based on the broker’s projection of earnings per share (EPS) for the current year of 47p, the shares trade on a price/earnings ratio of 11. “The valuation represents a premium to the General Retail sector (2011 PE 10.3x), but is justified by the relatively defensive profile and superior forecast earnings growth,” Hart maintains.
“We expect trading to hold up relatively well whatever shape the economic recovery takes. The recent Nationwide Autocentres acquisition fits well with the Halfords brand and offers a significant additional growth channel. Given our expectation that Halfords will deliver at least low double-digit EPS growth in each of the next three years, we consider the valuation undemanding,” the broker said.
It is sticking with its “accumulate” recommendation “and would add to holdings on any weakness.”
After sorting out its cost base in the year just gone the challenge now for miniature war games retailer Games Workshop is to grow like for like (LFL) sales, KBC Peel Hunt asserts.
LFL sales growth “would have a significant impact on the bottom line given the operational gearing,” KBC analyst Charles Hall believes.
The company has increased its earnings per share (EPS) forecast for fiscal 2011 from 35.6p to 38.3p as a result of a lower anticipated tax charge, and has bumped up its price target from 440p to 500p.
The broker is impressed by the company returning to dividend payments with a bang in the form of a 25p pay-out but with the company committed to paying surplus capital to shareholders there is every chance of bigger payments ahead, with the broker forecasting next year’s divi will rise to 35p.
Ahead of the results season for the renewable energy sector Nomura Securities has topped the solar sector to shine brightest.
“We expect a strong Q2 [second quarter] in the solar sector, while the US market weakness is set to continue to affect Q2 in the wind sector. Europe will make up some of the weakness. Centrotherm, PV Crystalox, Q-Cells stand out as offering a positive risk/reward balance,” suggests Nomura analyst Catharina Saponar.
“We expect improved order flow and a positive impact from euro weakness across the solar equipment segment, but rather than leading to guidance upgrades, we think this will fully underpin 2010 guidance that up to Q1 has not been covered through backlog in all cases. We also see PV Crystalox benefitting from strong wafer markets,” the broker said.
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