Broker tips: Halma, Tullow Oil, BP

(Sharecast News) - Goldman Sachs initiated coverage on Halma on Thursday with a 'buy' rating and 3,740p price target as it said its analysis demonstrates the sustainability of the company's high-growth, high-returns model. "This underpins our forecasts of more than 11% adjusted EPS CAGR and circa 18% average ROIC over the next five years," GS said.

"Our FY26/27/28 adjusted EBIT forecasts sit circa.1%/7%/9% ahead of Visible Alpha consensus data, backed by the group's alignment to high-growth industrial end-markets and its proven M&A strategy."

Goldman said it believes this formula for growth is simple but sustainable and therefore warrants a premium multiple.

The bank's target price implies around 15% upside and 23.5x 12m forward EV/EBIT, which is a 55% premium to multi-industry versus 65% historically.

GS said M&A growth is central to its thesis. It noted that Halma has committed around £2bn of capital across 94 acquisitions over the last 20 years, funded out of free cash flow. On average, M&A has added more than 3% to its sales annually, GS said.

"With recent investments in its M&A teams and a pipeline of more than 600 potential targets, a key distinction between our forecasts and consensus is our modelling of generic M&A," said Goldman Sachs. "This is backed by our analysis of the group's M&A record and our 16.4% average FCF margin forecast."

Analysts at Canaccord Genuity lowered their target price on exploration firm Tullow Oil from 16p to 10p on Thursday, stating that the group was currently in "a tough position".

Canaccord Genuity noted that Tullow was in the process of refinancing $1.285bn loans, currently maturing 15 May 2026, a process that it thinks can be achieved, but said the price may be "steep".

Unfortunately, Canaccord said that while those discussions were ongoing, Tullow's primary asset, the Jubilee field in Ghana, has "wobbled", producing roughly 61,000 gross barrels of oil per day in H125, compared with 87,000 a year earlier.

Furthermore, Canaccord pointed out that Tullow has "no more jewels to sell" following its successful exit from Gabon and the anticipated sale completion in H225 of its Kenyan assets.

The Canadian bank noted that additional cost savings were underway and that there were potential contingent receipts from previous asset sales, which together will help, but pointed out that the crux of the programme to reduce net debt and support equity value was the performance of Tullow's Jubilee field.

"There are some green shoots at the field; a new producer came online late July (producing 'decently'), another well is expected to contribute from late 2025 and four more planned for 2026, activities to fully restore water injection rates in H2 25 are underway, and there is new seismic to help shape longer-term field management," said Canaccord, which reiterated its 'hold' rating on the stock. "All positive steps, and the company appears confident, but in our view assessing the dynamics of the natural field declines, the concerning increased water-cut from some producers, and the sustained performance benefits of the new wells, is extremely challenging. It is how that combination unfolds, alongside of course oil prices, that will principally determine the equity value."

Berenberg upgraded BP on Thursday to 'buy' from 'hold' and hiked the price target to 500p from 385p following "significantly stronger" results through Q2 2025 combined with the recent positive exploration news flow.

The bank said the key driver of the improved outlook is a stronger free cash flow outlook, helped by lower capex, progress on the cost-cutting programme and recovery in the downstream business.

"At the same time, exploration success, particularly the potential at the Bumerangue field in Brazil, may offer investors comfort on the medium- to longer-term outlook for the upstream business," Berenberg said.

It also noted that BP's new chairman was kicking off his appointment with further reviews on both costs and the broader portfolio, pointing to an ongoing focus on shareholder returns.

"The $20bn divestment plan should enable both lower net debt and the continuation of attractive buybacks in 2026, leaving a 10% total cash shareholder return (a 6.2% dividend yield)," it said.

Berenberg increased its earnings per share estimates for BP by 11%/8% for 2025/26, respectively, driven by higher gas and refining assumptions.