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Broker highlights - Cruises, electricity and wind

19 December 2016 14:44

Berenberg Bank has changed tack on Carnival (LON:CCL) by moving to a 'hold' call (from 'buy'), believing "headwinds are blowing hard" for the cruise operator.

The broker said: "We remain positive about the outlook for yields in the cruise industry going into 2017.

"However, recent trends in the cost of fuel, a further strengthening of the dollar and an increase in interest rates create headwinds that we think will be tough for Carnival to offset."

Berenberg roped in its price target to £40 a share (from £42).

Meanwhile, Barclays Capital repeated its modest 'equal weight' stance in its fourth-quarter earnings preview note on the stock.

Research analysts commented: "Carnival's 4Q16 earnings release and outlook could be noisy as the impact of rising FX/Fuel costs will likely drive 2017 EPS lower than current consensus and could cloud what should otherwise be a positive fundamental outlook."

Turning its attention to electricity generator Drax (LON:DRX), Societe Generale upped its recommendation to 'buy' from 'hold', which it said was primarily based on management's indication that State aid approval for its 3rd unit biomass CfD should be received very soon.

The approval was announced by the company just before lunchtime, sending the shares 9 per cent higher.

The company said: "Drax confirms that the European Commission (EC) has today approved the CfD Investment Contract, awarded to Drax by the UK Government, for its third biomass unit conversion.

"The strike price remains £100/MWh and there are no changes to the terms of the contract."

SocGen hiked its target price to 415 pence a share (from 270 pence) prior to the formal announcement from Drax.

Elsewhere, Cantor Fitzgerald moderated its investment rating in respect of wind turbine focused technology group Windar Photonics (LON:WPHO) and moved to 'hold' from 'buy' after company warned that sales would be below expectations for 2016.

Nevertheless, the broker highlighted that the company is still making progress and commented: "The warning is despite progress being made during the year with both wind turbine manufacturers and with turbine owners and operators.

"The company is continuing to negotiate and trial units with new customers and remains optimistic of progress in FY 2017. In particular the partnership with the Danish Technological University is attracting new interest."

Cantor's target price is currently 'under review'.

At 2:43pm:

(LON:CCL) Carnival PLC share price was -51.5p at 4016.5p

(LON:DRX) Drax Group PLC share price was +26.95p at 350.95p

(LON:WPHO) Windar Photonics Plc share price was -10p at 85p

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Related Company: CCL

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