Market Report: Spirent boosted as its US peer group turns it on
Saturday 05 February 2011
A positive read-across from two of its US peers raised investors' hopes ahead of Spirent Communications' update next month, pushing the company up 5.2p to 152.4p.
The telecommunications group, which produces testing equipment, announces preliminary results in March, and analysts said figures released late on Thursday by Ixia suggest Spirent's numbers will impress.
The North American company announced forecast-beating revenue, which Numis Securities' Nick James said indicates Spirent's "orders performance could be stronger than some expect for the fourth quarter".
Mr James said the "continued momentum in Spirent's markets has the potential to drive upside to [its] revenue estimates". Panmure Gordon's George O'Connor agreed.
The analyst – who increased his target price on the company to 155p – said that Ixia's update gives "the clearest signal yet that Spirent is set to report results at the upper end of its 7 to 10 per cent guidance growth rate".
Meanwhile, market voices highlighted figures from JDSU as well, also released on Thursday, which showed the company's test and measurement year-on-year sales had increased by nearly a third.
Overall, the FTSE 100 edged up 14.04 points to 5,997.38, despite the key non-farm payroll numbers from the US proving disappointing, and the FTSE 250 made 90.7 to close at 11,666.53.
The water utilities found themselves among the day's biggest movers after Bank of America Merrill Lynch was gushing in its praise for the groups, saying they offer "the purest exposure to high inflation among the UK utilities".
Severn Trent and United Utilities had their rating changed to "buy" from "neutral", and were lifted 50p to 1,440p and 24p to 579p respectively, while Northumbrian Water – up 5.6p to 314.1p – and Pennon – up 4.5p to 621.5p – were upgraded to "neutral".
As Egyptian demonstrators in Cairo continued their attempts to oust President Hosni Mubarak, Tui Travel had a further fall, dipping 2p to 241p. The tour operator failed to get a helping hand from Nomura, which reduced its recommendation to "neutral" from "buy".
Fears that Vedanta Resources may pull out of the $9.6bn deal to buy its Cairn India unit left Cairn Energy at the foot of the top-tier index, 11.7p lower at 426.3p. Reports from India claimed that Vedanta – 22p higher at 2,387p – will abandon the acquisition if Cairn India gives in to demands being made by the country's oil ministry.
Takeover rumours were making their presence known on the second line, as two old favourites made a return. Cable & Wireless Worldwide climbed 3.35p to 76.35p as speculation spread it could be in line for an approach. Similar chatter has circled the company before – including last month – with AT&T one of the names previously mentioned as a potential suitor.
Meanwhile, ITV was driven up 4.65p to 84.05 by the re-emergence of gossip that it may receive a bid from a US cable television company. A potential price of 120p-a-share was mentioned, although traders also pointed to recent positive sentiment over global advertising as another reason for the broadcaster's rise.
SuperGroup was top of the mid-tier index after announcing the purchase of its main franchisee in a €40m deal it described as a "game changer". It certainly looked as if the market welcomed the purchase of CNC Collections, the clothing retailer's distribution partner in a number of European countries, as it advanced 180p to 1,710p.
Atif Latif, director of trading at Guardian Stockbrokers, described the deal as a "sound strategic acquisition by SuperGroup [which] allows them to increase margins in the Benelux ... and key regions."
Stagecoach was 5.3p ahead at 220p after Morgan Stanley chose the transport group as its top pick in the bus-and-rail sector.
Analysts from the broker increased their earnings forecast for the company, citing a "more positive stance on the outlook for growth within its Megabus business in the US".
However, they were less positive on the American activities of FirstGroup, and cut its price target to 379p because of their caution over "revenue growth and margin progression in its US school bus and Greyhound businesses." The company fell 5.4p to 371.3p.
Among the small-cap companies, HMV finished 2p stronger at 24.75p thanks to talk that the struggling high street chain could be broken up. According to reports, shareholder Alexander Mamut is being advised by Credit Suisse on possible options for the retailer – prompting speculation that he could bid for the Waterstone's booksellers business – while the private equity firm Permira Advisers LLP may also be interested in the company.
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