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(Sharecast News) - Analysts at Berenberg cut their recommendations on DCC and Mitie from 'buy' to 'hold' on Wednesday, citing the stocks' recent bid‑driven share price moves and limited upside relative to agreed takeover valuations.
Berenberg said the UK business services sector continued to offer attractive exposure to long‑term structural growth themes at reasonable valuations, with most companies in its coverage delivering earnings upgrades this year.
However, it noted that performance across the sector had been driven more by thematic positioning, acquisitions and sentiment than by any clear macro recovery, making cycle‑calling difficult nine months into 2026.
Berenberg said DCC's downgrade reflected its current share price relative to the 6,672p bid value offered by KKR and Energy Capital Partners, though it left its 6,700p price target unchanged.
The German highlighted the group's ongoing simplification strategy, with DCC Healthcare sold and DCC Technology in the process of being divested, and reiterated its view that the energy distribution business remained the core driver of long‑term value.
Mitie was also cut to 'hold' following the recommended takeover by OCS Group, with this analysts also adjusting their target price to 219p, in line with the 218.5p per‑share cash offer plus the 3.1p final dividend, giving total consideration of 221.6p - a 45% premium to Mitie's undisturbed price.
Berenberg said its previous bullish stance had been based on Mitie's strong bidding pipeline, margin‑expansion potential and proven execution since FY17, but noted that the agreed bid now effectively capped upside.
It added that OCS, backed by private equity, had rapidly expanded its technical FM capabilities through recent acquisitions, and that the takeover valued Mitie at around 14.3x earnings, well above its historical average.
Citi downgraded its stance on educational publisher Pearson on Wednesday to 'neutral' from 'buy' on valuation grounds following a roughly 40% rally in the shares since their February low.
The bank said Pearson's first-half performance highlighted positive operational momentum with a small beat at sales and adjusted EBIT levels.
"Following the H1 performance, we increasingly believe the medium-term framework for average margin growth of 40bps as a floor," it said. "In the short term, the weaker A&Q margins and a downgraded guide for English Language Learning have led us to trim our FY26E forecasts for adjusted EBIT, and EPS by 1%."
Citi lifted its price target on Pearson to 1,345p from 1,300p, mainly to reflect a higher target multiple of 17x, from 16.5x.
"At the current valuation, the shares fairly reflect the balance of operational momentum with limited upside to short-term consensus," the bank said.
