Broker tips: Savills, Travis Perkins, Smith & Nephew, Tesco, Next, Sainsbury's, AB Foods

(Sharecast News) - Analysts at Shore Capital initiated coverage on real estate services group Savills with a 'buy' rating and an 1,180p target price on Monday, citing longer-term opportunities. Shore Capital views Savills' shares as priced to reflect a cyclical trough, yet believes it enjoys significant opportunities from cyclical recovery and the potential to build earnings per share beyond that from a strategic refresh under its new chief executive.

Savills pointed to "strong" transactional pipelines early in the second half, something Shore Capital said was "seasonally key" for full-year profits.

Shore Capital noted sell-side consensus was looking for full-year pre-tax profits of approximately £147m in 2025 and has forecast similar levels since early this year.

"Instinctively, developments for TA prospects through FY25 have felt less stable to us, so we have pitched a little lower at £138m," said Shore Capital. "But even if we are right on that outcome, the share price looks to have moved ahead of such an event, given we think it largely reflects cyclical trough levels already."

While it started coverage with a fair value of 1,180p, largely based on reversion to igs historical 13.7x price-to-earnings ratio, but said it also sees a path to 1,300-1,400p under cyclical recovery scenarios over time, or towards 2,000p if strategic opportunities can fully crystalise.

Panmure Liberum has reiterated a 'buy' rating on building merchant Travis Perkins, saying self-help measures should boost earnings upside potential even if market conditions don't improve.

The broker said that the company is regaining some lost market share after having streamlined its business model in 2021, while recent updates show how an increased customer focus is delivery improved quarterly like-for-like sales.

"We expect this trend to continue. Therefore, even without a rebound in the trading environment, we see scope for modest revenue growth and some margin expansion," Panmure Liberum said.

Any improvement in the trading backdrop provides scope for an upside surprise, while the incoming chief executive who starts in January could be a catalyst for further growth.

However, the stock remains at the bottom end of its 10-year range, with investors across the sector nervous about the financial health of the whole building materials supply chain. The broker has a 740p target price on the stock.

RBC Capital Markets downgraded Smith & Nephew to 'sector perform' from 'outperform' on Monday and slashed the price target to 1,350p from 1,700p as it said the risk/reward was balanced.

"Although we see new mid-term guidance as potentially achievable from 2027, we see material risk of downgrades to 2026 guidance through the year," the bank said. "With the 12 Point Plan completed and shares up 22% in 2025, our recovery thesis is largely played out, and the risk of FY2026 guidance downgrades now outweighs limited near-term catalysts." As such, RBC said it was moving to the sidelines until clearer evidence of 2026 guidance achievability emerges.

In a separate research note on Monday, Citi reiterated its 'buy' rating on the medical technology company after attending the second part of its capital markets day in NYC.

Citi said the event focused on innovation across all divisions, with key opinion leaders sharing their positive experience with S&N products. Key takeaways from the CMD included management striking a constructive tone on US knee momentum, noting Legion MS is already having an impact on S&N's share momentum.

Citi said it walked away somewhat more impressed by S&N's competitive positioning in the ASC (orthopaedic ambulatory surgery centre) segment, although Stryker's upcoming robotic launch will be one to watch.

Citi said the breadth of S&N's sports medicine portfolio is likely under-appreciated by the market, in its view.

"All in, we walked away incrementally more positive: we continue to see the current valuation of circa 14x P/E (2026E) versus the 2015-2019 range of 15-23x P/E as undemanding, and reiterate buy."

Jefferies adjusted its ratings on a host of UK retail stocks on Monday, having updated its consumer disposable spend forecasts for 26/27.

The bank said the update shows a potential mismatch developing between consensus like-for-like sales and a more muted spending environment. "This more cautious view prevents us arguing for further multiples expansion at Tesco/Next after their justifiable year-to-date rerating," it said.

Jefferies downgraded both Tesco and Next to 'hold' from 'buy' but lifted the price targets to 450p from 440p and to 1,400p from 1,300p, respectively. Sainsbury's was kept at 'hold' but its price target increased to 330p from 300p.

As far as Associated British Foods is concerned, Jefferies said it sees "more pressing concerns", with Primark's challenges likely to continue. As a result, it downgraded the shares to 'underperform' from 'hold' and cut the price target to 1,800p from 2,000p.