Broker tips: Senior, Harbour Energy, Diageo

(Sharecast News) - Analysts at Berenberg initiated coverage on engineering and manufacturing group Senior with a 'buy' rating and 275p target price on Friday, offering 47% upside to the stock's current share price. Berenberg said Senior's recent announcement that it has agreed to sell its aerostructures business was "a pivotal moment" for the company, in its view.

The German bank said the sale of the aerostructures business will give Senior the opportunity to structurally increase its group operating margins, focus on higher growth and more value-added products and provide more capital allocation options.

Following the completion of the sale, Berenberg reckons group revenues should "move closer to a more balanced revenue base" between industrial and aerospace end-market exposure.

"We therefore broaden the traditional aerospace and defence peer group to include more industrial fluid control peers. We expect re-rating potential ahead as revenue growth, margins and cash generation increase," said Berenberg.

"We apply a 25% discount to our EV/EBITDA-based price target to reflect the lower relative margin profile at Senior. Senior currently trades on CY26E EV/EBITDA of 8.4x, half the level of its higher margin and lower than its financially leveraged peers."

Over at Canaccord Genuity, analysts nudged up their target price on independent oil and gas company Harbour Energy from 275p to 285p on Friday after the group released "a very strong set" of H1 numbers.

Canaccord Genuity said Harbour's H1 results pointed to strong production levels, reduced operating costs, "excellent" free cash flow generation, and an "impressive" reduction in net debt.

The Canadian bank also noted that Harbour announced a $100m share buyback for 2025, in addition to the approximately $455m of dividends guided to, for a total of roughly $550m of shareholder returns for 2025.

"Given the uncertainties some have had over the upside potential of the Harbour/Wintershall DEA combination, we believe the progress made in H1 should put most to rest with the Harbour team proving its operational prowess over multiple jurisdictions," said Canaccord Genuity.

"In our view, the area of most interest is the FCF performance and net debt reduction achieved in the first half. Thanks to better-than-expected production, timely hedging and improved cost management, the free cash has really driven the material reduction in net debt. While we do expect a slight reversion here in H2, this is our first real sign of what the combined businesses can do."

Goldman Sachs upgraded Diageo to 'neutral' from 'sell' as it said the valuation was supportive and downside was limited.

"We see limited downside risk in FY26, as new management steps-up cost saving to support best-in-class margins and stabilise earnings, albeit visibility remains low and the outlook is based on a 2H recovery," the bank said.

It also noted that cost savings should support margins in FY26, although it said Diageo's top line performance needs to improve from FY27 for margin progression to continue.

"However, the step-up in free cash flow we expect is positive, reminiscent of the FY15 uptick under Deirdre Mahlan in her first stint as CFO," Goldman said.

GS, which kept its 2,000p target price unchanged, expects net debt/EBITDA to fall to 3.2x in FY26 from FY25's 3.4x, excluding disposals, and said the stock's valuation, at 15x CY26E P/E and 12x EV/EBITDA, was "compelling in an historical context".