Broker tips: Marks & Spencer, RS Group

(Sharecast News) - Berenberg hiked its price target on Marks & Spencer on Thursday to 480p from 415p after the company's full-year results. The bank, which maintained a 'buy' rating, said it was increasing its FY 2027 adjusted pre-tax profit estimate by 2% to around £938m.

"The company seems confident of a full profit recovery in FY 2027E (to March 2027) following the disruption caused by the April 2025 cyberattack," it said. "We expect the food division to lead the way, noting its ongoing growth.

"At the heart of the explanation for M&S's food market share gains - despite cyber-disruption - is management's unwavering focus on improving customer appeal through a combination of price, quality, style, innovation and customer experience in stores and online."

Berenberg said that provided this customer-pleasing approach continues, it expects sustainable recovery and growth in both the food and fashion divisions.

"The company's plan requires heavier investment into stores, systems and logistics than experienced under previous management teams, but we think the top-line growth strategy could ultimately reward investors," it said.

Elsewhere, RBC Capital Markets nudged up its price target for RS Group to 780p from 770p after the company's full-year results, which it said were "sound" and consistent with the March trading update.

"The new news was an improvement in the top line run-rate of late, better than expected free cash flow and a £100m buyback," RBC said. "Clearly the macro outlook remains uncertain, but RS1 continues to control the controllables."

RBC said its underlying assumptions are largely unchanged but 27/28 earnings per share estimates move up 2%/4% for the buyback.

The bank maintained its 'outperform' rating on the stock and said its positive view was unchanged.

"Despite ongoing macro uncertainty, we continue to see RS Group as positioned well for further recovery in PMIs when it comes, and going forwards, we would also expect to see some benefit from the investment that has been made in the business over the last few years," it said.

"It is also encouraging to see a strong H2 gross margin performance, highlighting the value-added nature of RS1's proposition. Medium term, we see scope for further share gains and improved margins (from efficiencies, leverage and greater penetration of RS Pro and value-added services)."

RBC said the balance sheet also remains strong with FY27E gearing estimated to be circa 1.1x (post the £100m buyback) providing options for further M&A, which it doesn't factor into its forecasts or target price, or cash returns.