Broker tips: EasyJet, Dunelm, Intertek

(Sharecast News) - Analysts at RBC Capital Markets lowered their target price on budget carrier EasyJet from 440p to 415p on Friday as a result of lower expected revenues and a further 6% increase in fuel costs. RBC Capital Markets cut its underlying earnings forecasts by roughly 37% on average over FY26-FY29 on both increased fuel costs and also a roughly 1% average cut to top-line forecasts following EasyJet's recent trading update. RBC also noted that year-ahead jet fuel forwards have edged up a further 10% over the last month.

The Canadian bank, which has an 'outperform' rating on the stock, stated EasyJet "now trades around some previous trough valuations" on price-to-book value and enterprise value-to-invested capital in "tough times", but it also noted that "tough times pass".

"Although we continue to see greater upside in some other 'outperform' rated airlines, we think this valuation limits downside risk, whilst leaving asymmetric upside potential if the geopolitical backdrop improves," it said.

"We are above the bottom end of consensus in FY26E, but at or around the bottom end of consensus beyond, not helped by a further increase in fuel unit costs (post hedges) in FY27E."

Canaccord Genuity lowered its target price on retailer Dunelm from 1,280p to 1,240p on Friday after the group's recent third quarter numbers highlighted "softer recent trading".

Dunelm saw group sales rise 2.1% to £471.6m in Q3, with initial strong growth seen across the start of the quarter, as reported at the time of its interim results in February, before a period of broad-based softening in trading during March.

Canaccord Genuity noted that Dunelm's digital sales "remained encouraging" during the quarter and represented 43% of its total sales mix, up two percentage points year-on-year, reflecting "sustained progress" across online, click and collect and in‑store digital channels.

The Vancouver-based financial services firm pointed out that gross margins had increased by roughly 30 basis points year-on-year, supported by ongoing FX tailwinds seen in H1, but partly offset by customers trading into more discounted products compared to full price lines.

Canaccord Genuity, which reiterated its 'buy' rating on the stock, also highlighted that cost and productivity plans at Dunelm remained on track, with the group focused on "disciplined execution despite a more uncertain consumer backdrop".

"The group remains cautious on the near-term outlook given ongoing global uncertainty, with recent events in the Middle East expected to have only a small direct cost impact this financial year. While trading remains resilient and cost plans are on track, management is not assuming any immediate recovery in consumer confidence and therefore expects FY26 PBT to be towards the lower end of market consensus of £213m (range £210m to £217m)," said the analysts.

"We have reduced our FY26E estimate by 2% to £210m, whilst taking a slightly more prudent stance for outer years reducing forecasts by 4%, given the ongoing geopolitical uncertainty and potential near-term impact on the UK consumer outlook."

Canaccord said Dunelm trades on a FY26/27 price-to-earnings ration of 10.6x/10.3x with a FY26 dividend yield of 5.6%.

Jefferies said on Friday that Intertek's strategic review was likely a defensive move and that it will be interesting to see if any other potential bidders emerge, either strategic or additional private equity, after it rejected a takeover proposal from Sweden's EQT.

Shares in the inspection, product testing and certification company surged on Thursday after it confirmed it had rejected a 5,150p per share takeover proposal from EQT, stating the offer fundamentally undervalues the group.

Jefferies said the offer values Intertek at 19.8x FY26 estimated price-to-earnings, 12.5x EV/EBITDA, or 4.5% free cash flow yield on its estimates. This represents a 35% premium to Monday's share price but only an 18% premium to the closing price on Thursday and the average share price over the last three months.

It also said: "It is now clear that Intertek's announced strategic review was likely a defensive response to this bid and a likely tactic to help support the share price."

"In hindsight, we see the review as a strategic move by management to help support the share price and/or provide an opportunity for potential additional bidders to emerge," it said.

"Should a formal bid be made, the key debate for shareholders will be should they take the offer or wait to explore the potential outcome of the Strategic Review and separation for the business.

Jefferies, which has a 'buy' rating and 4,800p target price on the stock, believes any improved offer would likely need to be at least 5-10% higher than the rejected approach to be entertained, comfortably valuing the business at more than 20x recent price-to-earnings highs.