Market Report: Carnival still in choppy waters

 

Ripples from the deadly capsizing of the Costa Concordia off the coast of Italy in January were still being felt by cruise ship owner Carnival yesterday.

The group, which is dual-listed in the US and London, reported continued signs of sea sickness as its profits and sales were below forecasts. It is still suffering from the effects of the disaster as fewer people decide to take cruises, and bookings for 2013 are still below last year.

Carnival, which runs Carnival Cruises and Holland America, missed analysts' forecasts for the full year and reported profit of $93m (£57m) on sales of $2.66bn, down from profit of $217m on sales of $2.82bn a year earlier.

Back in October investors had thought the worst was over when its US rival Royal Caribbean raised its full-year forecasts. But yesterday's update left Carnival's shares down 154p at 2,391p, finishing at the bottom of the index .

The blue-chip table was desperately trying to hang on to the previous day's gains, and managed to stay in positive territory until lunchtime – giving hope that the so-called "Santa Rally" could take the index to the coveted 6,000 mark by the end of the year.

An update that the US economy has grown more than expected failed to lift the mood after lunch in London and investors remained fixated on the talks about resolving the US fiscal cliff. News that these talks may have reached a stalemate sent the FTSE 100 index down 3.25 points to close at 5,958.34.

Stocks still propping up the benchmark index included engineer Weir Group, which has bought Mathena for $240m. Mathena, which provides equipment and services for oil and gas drillers, will help Weir's move into the US shale gas market.

Investec raised its price target to 2,100p and rated Weir a buy. The group has been the subject of bid chatter earlier this year with rumours that General Electric could be interested. But the rumours remained vague. The shares gushed up 51p to 1,863p.

ITV found itself at the top of the table as investors tuned in to its plans for recovery. Analysts at Galvan rated it a "buy" the previous day and the shares broadcast a 3.2p gain to 107p.

Nomura's David Hayes upgraded his price target for British American Tobacco. He thinks the group will "see the strongest organic profit development" of the sector and he raised his target to 3,880p, rating the shares a buy. But he retains Imperial Tobacco as reduce – or sell – with a target of 2,510p. BAT puffed up 15p to 3,110p and Imperial was static at 2,397p.

Could Dairy Crest be looking at stocking up its food cupboard next year? That's what Investec thinks, and Nicola Mallard at the broker reckons the milk-to-cheese group could have £100m in the kitty to feed its hunger.

Dairy Crest's shares closed at an 18-month high of 400p earlier this week, and Ms Mallard upgraded her forecasts and increased her target to 420p, rating the shares a buy.

She said the "stock has had a decent run since the release of its interim results" and the company's cost-cutting plan has convinced her to think the outlook could be better for the dairy group next year.

The company survived the milk-pricing row earlier this year, and Ms Mallard thinks it has up to £100m to spend following the sale of its French spread business St Hubert.

"It is clearly conscious it needs to spend wisely – it is replacing earnings from a very attractive business [St Hubert] and any deal also needs to enhance the growth profile of the group, all without overpaying," she said.

The group, whose brands include Cathedral City cheese, was the subject of takeover speculation at the beginning of the year after Müller snapped up rival Robert Wiseman Dairies, but for now analysts think it is more likely to be acquirer than acquired. The shares lost 6.4p to 393.6p yesterday.

The small-cap medical device maker Consort Medical has flogged King, which specialises in devices for airways, to Ambu of the US. Investec's Sebastien Jantet said the £105m price tag is well ahead of the £55m value he had attached to King, and "it should add at least 70p to the share price". The company's shares ticked up 29p to 820p.

AIM-listed Bridge Energy updated the market on its Asha oil discovery in Norway with partners Eon and Wintershall and its share price spurted up 5.5p to 105.5p.

Buy

Centamin

Snaffle some shares in gold miner Centamin, analysts at Westhouse suggest. The Egyptian-focused miner has had to deal with a series of problems but yesterday it confirmed its operations are now fully up and running at its Sukari mine. Westhouse's experts think that while the issues have eased "we anticipate that the company could encounter additional problems". They still think it is worth buying at 65p but it "is not a stock for the risk averse". The stock rose by 1.25p to 42.71p yesterday.

Sell

Darty

Ditch shares in retailer Darty, scribes at JPMorgan recommend. There are pressures on both the top line and its margins and JPMorgan's analysts think in "the near term, conditions have continued to deteriorate". They give the stock a share price target of 40p. The shares lifted 1.75p to 60.25p.

Hold

Thomas Cook

Stop selling your shares in travel firm Thomas Cook, Peel Hunt's expert reckons – it is time to hang on to them. Peel's Nick Batram said: "This is the honeymoon period for new management and sentiment towards the stock is now focused on how far and how quickly the turnaround can be delivered." He upped his share price target to 41p, up from 10p. The shares rose 2.75p to 45.5p.

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