Source: Sharecast
Bernberg said a "well-received divestment" of Johnson Matthey's catalysts technologies segment, improvement in FY25 margins for clean air and higher platinum group metal prices all played a role in the stock's outperformance.
As a rough estimate, Berenberg believes that around half of Johnson Matthey's share price outperformance can be attributed to the divestment, 35% to PGM prices and 15% to higher margins in clean air.
The German bank also said higher, more volatile PGM prices mean consensus underlying earnings estimates for Johnson Matthey were "a mid-single-digit percentage too low for the next few years".
"Yet the shares have run hard and additional PGM capacity will come to the market with the Platreef project in 2026," said Berenberg, which retained its 'hold' rating on the stock.
"The mid-single-digit percentage increases to our EPS estimates for FY26-27 reflect the tailwind to the PGM Services segment from higher PGM prices and volatility. The shares trade on FY27E EV/EBITDA of c6x and FCF yield of just over 10%, which we think is fair for a cash-focused ex-growth asset."
Shares in Compass jumped on Tuesday after a strong third-quarter update from the catering group, prompting broker Shore Capital to reiterate its longstanding 'buy' recommendation on the stock.
Shore Capital said the stock's valuation multiple was currently at the higher end of the range its been over the past decade – EV/EBITDA of 14x, compared with the 12-15x range since 2015 excluding the pandemic years.
However, Shore Capital said: "We continue to highlight the attractive long-term structural growth opportunity (organic growth of 6-8% vs 5% historically) and its proven ability to manage through inflationary periods and continued strong execution."
Shore Capital expects earnings per share estimates for the current year to be upgraded by a mid-single-digit percentage following Tuesday's update, in which Compass pointed to operating profit growth "towards 11%", compared with earlier guidance of a high single-digit improvement.
Organic growth in the third quarter came in at 8.6%, in line with the 8.5% growth recorded in the first half. Shore Capital had expected a "modest slowdown".
