Best of the Brokers

Morgan Stanley rates the defence firm “equalweight” but has cut its target price from 330p to 320p. The uncertainty about governments’ defence spending continues to weigh on BAE’s earnings growth, and the broker sees cash returns to shareholders as the key investment case at the moment. Morgan Stanley expects the firm to maintain a dividend ratio of around 50 per cent of free cash flow, but to stop short of share buybacks.

Singer Capital Markers has downgraded the investment manager from “buy” to “fair value” and maintains a target price of 570p ahead of annual results on Wednesday. The broker expects Hargreaves to have outperformed the FTSE All Share with a five per cent rise in assets under administration, driving revenue growth to 14 per cent. Singer forecasts pre-tax profits of £147.9m, a rise of 15 per cent on the previous year.

UBS has upgraded the utility firm from “neutral” to “buy” with a raised target price of £15.15 to reflect growing opportunities in the renewables industry. The broker expects to soon see the first earnings flow from SSE’s £1bn spending spree on renewables, and there is the prospect of growth as the gas market recovers. UBS is also impressed by the firm’s strong 6.4 per cent dividend yield.