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Broker tips: Shire, Bodycote, Indivior
Analysts at both Credit Suisse and Deutsche Bank dropped their target prices for Shire after the biotech group said its sales would grow in mid-single figures and profits would rise at a more glacial pace.
Credit Suisse kept its 'outperform' rating on Shire but dropped its target price to 4,000p from 4,500p, saying that its enthusiasm for the group came from the view that its immune system franchise, of which it was adding a stronger global commercial focus, and its move to use its current strong cash flow to pay down debt.
The Swiss bank's analysts noted that the target price reduction was purely based on the 3% cut in their 2018 earnings per share projections for Shire.
Over at Deutsche, which also dropped its target price to 4,500p from 5,000p, Shire's EPS forecast was cut 5%, citing lower margins due to start-up costs and lower capacity utilisation at its Covington manufacturing facility as its reasoning.
"We remain buyers of the shares given a continued valuation disconnect but are cognizant that there remain limited catalysts in the near-term," analysts wrote.
Bodycote, which provides heat treatment services and specialist thermal processes, was boosted on Thursday as JPMorgan Cazenove upped the stock to 'overweight' from 'neutral' and bumped up the price target to 960p from 850p.
The bank noted the shares are off around 12% from recent highs and said the pullback is a buying opportunity.
Other reasons why the stock is an opportunity include the consensus upgrades to come with the 6 March results, an attractive near-term relative and absolute valuation and a potential special dividend with the March numbers.
"We believe consensus is underestimating the impact of the broad-based pick-up in demand and the potential for Bodycote to overshoot underlying market development as customers restock," it said.
JPM upped its 2017/18/19 earnings per share forecasts b 2%/7%/10%, putting its forecasts 1%/7%/9% ahead of Bloomberg consensus.
Jefferies, RBC Capital Markets and Numis reiterated their positive recommendations on Indivior as the opioid addiction drug maker's shares slipped on the back of final results on Thursday.
Sales, mostly from the Suboxone opioid addiction film, grew 3% to £1.09bn in 2017, in line with management's previous guidance, noted Numis, driven by 2% growth in the US, and 7% outside America "as the opioid crisis spreads".
Indivior's directors guided to another year of top- and bottom-line growth in 2018, with net revenue of $1.13-1.17bn and net income of $290-320m, excluding exceptional items and at constant FX and assuming no launch of a generic film rival and "modest" expectations for Sublocade in its first year.
Consensus had 2018 revenues of $1,08bn and EPS of circa 32 cents, implying upgrades are likely.
The guidance for 2018 "looks well ahead of market expectations and could imply >10% upgrades from consensus", wrote the Numis analysts. "We await more details on costs (lower legals?) in FY18, which appear to be slightly lower than we had forecast, but otherwise happy with our top of the range numbers with the company more bullish than we normally expect at this time of the year."
RBC Capital Markets, which stayed with its 'outperform' and 540p price target, said the results have missed its EPS expectations 3.8% due to higher costs, but the 2018 guidance was seen a positive, "in line with our estimates and meaningfully ahead of consensus", and while investor sentiment might focus on the higher DoJ provision, "the company can afford this."