Proactive Investors -
- FTSE 100 up 32 points at 7,662
- Bank of England rate decision at midday
- Shell (LON:RDSa) launches $3.5bn share buyback
Barclays cuts Next on lack of short-term catalysts
Next is 2.2% lower after Barclays (LON:BARC) downgraded the retailer to ‘equal weight’ from ‘overweight.’
The bank said the change is driven overwhelmingly by valuation – the share price has moved beyond its previous price target of 8,250p and now sits close to its new price target of 8,500p.
“We continue to think NEXT is an exceptionally well managed company with interesting long-term growth prospects, strong cash flow generation and consistent cash returns.”
“However, NEXT is now trading close to its five-year average P/E and EV/EBITDA multiples and our valuation of the business is very close to the current share price.”
“We do not see obvious catalysts in the near term now that the company has set out its initial profit guidance for FY24/25,” it added.
Shell ends tricky year on a high note
On Shell, Richard Hunter, head of markets at interactive investor, commented: “In what was a difficult year for the oil majors, Shell ended on something of a high note as fourth quarter numbers beat expectations despite lower earnings.”
Hunter highlighted the company’s "extraordinary" cash generation, despite the lower earnings, meaning an increase to the dividend, "where the forward yield of 4.2% provides some attraction to income-seeking investors."
In addition, he noted Shell announced another share buyback programme of $3.5 billion to be completed on the coming quarter.
Net debt is generally travelling in the right direction also, reducing from $44.8 billion the previous year to $43.5 billion, although ticking up from the figure of $40.5 billion at the end of the previous quarter, he added.
Shares are 2.6% in London.
Goldman expects 9-0 vote to leave UK rates unchanged; first cut in May
Goldman Sachs (NYSE:GS) expects a 9-0 vote to leave interest rates unchanged at midday.
The vote split remains “difficult” to predict given limited recent commentary by MPC members, the bank said, and a dovish dissent in the form of Dhingra voting for a 25bp cut and/or a hawkish dissent in the form of Mann voting for 25bp hike are possible.
But “we think hawkish dissents are less likely given that there has been a moderation in underlying services inflation since the MPC’s last meeting.”
Goldman expects the updated projections to show “meaningful revisions.”
It expects the growth forecast to be revised upwards and the inflation projections down in the near-term given lower energy prices.
Goldman suggested that the MPC may mitigate its tightening bias and soften its policy language somewhat by no longer stating that “further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”
It continues to expect the first 25bp cut in May, followed by 25bp cuts every meeting until Bank Rate reaches 3% in May 2025.
But it sees risks to the baseline forecast as being skewed towards later cuts.
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