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6 New Stock Reports from Morningstar Analysts

ARM, BP and Glaxo are among the latest research reports to be launched by Morningstar's equity analysts

Holly Cook 25 July, 2013 | 2:22PM

Morningstar’s equity analysts have released six new stock research reports this week, including assessments of results from ARM, GlaxoSmithKline and Kingfisher; investment thesis reviews for Sage and TUI Travel; and reactions to BP’s latest Macondo costs trial.

Click on a company name to read the full analyst report on that company, or on the share price link in brackets to see fundamental data for the stock.

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ARM Holdings (ARM share price) reported decent second-quarter earnings and gave investors a solid third-quarter outlook that was in line with our expectations. We will maintain our fair value estimate and Morningstar Economic Moat Rating for ARM, but we continue to believe that the stock price reflects overly optimistic assumptions about long-term royalty growth, particularly from PCs and servers.

Late Friday, Judge Carl Barbier denied BP's (BP share price) emergency request to freeze business/economic loss claims payments that the company alleges are being incorrectly computed and if unchecked will result in billions of dollars of overpayments. (Barbier is the judge running MDL 2179, the Deepwater Horizon trial, which covers the issues making up the vast majority of BP’s remaining financial exposure.) For now, we are maintaining our fair value estimate and Morningstar Economic Moat Rating, as well as our assumption that BP's claims process will experience $6 billion in cost overruns beyond the $7.8 billion initially estimated.

GlaxoSmithKline (GSK share price) reported second-quarter results in line with both our expectations and those of consensus. We don't expect any changes to our fair value estimate of $56 per share. Further, Glaxo continues to make strides in creating next-generation drugs, which supports our wide moat rating on the firm. Additionally, the firm continues to expect full-year 2013 earnings-per-share growth of 3%-4%, which we expect the company will meet.

Kingfisher (KGF share price) reported broad sales growth in the majority of its operating regions during the second quarter. Total like-for-like sales increased 2.5% thanks to positive results in the France (up 3.4%), United Kingdom and Ireland (up 2.5%), and Other International (up 5.3%) geographic regions. The company continued to open new units in the majority of its markets despite the economic softness, driving consolidated revenue up 5.2% to GBP 5.8 billion. Management attributed the rebound to the firm’s ability to capitalize on more favorable weather conditions, but warned that consumer confidence was still weak in its core markets.

Sage (SGE share price) is reinventing the way it does business. The company is viewed as a federation of national champions in on-premise software. However, its inability to adjust to evolving technological trends, such as cloud computing, has eroded the company's incumbent status in the face of more nimble competition from pure-play rivals. While the shift to online rivals poses a significant long-term risk, over the midterm, we believe Sage will continue to perform well thanks to a trove of loyal existing customers and a new strategic plan aimed at refocusing and centralizing operations.

TUI Travel's (TT. share price) portfolio of distinct brands known for decades to European holidaymakers, and better access to travel inventories due to its scale, have enabled TUI Travel to control one third of the package tour business in Europe, but the firm has struggled to deliver returns above its cost of capital over the past five years. Over the next few years, we expect sluggish leisure travel spending in Europe and growing threats from do-it-yourself travel bookings will add to the challenges that TUI Travel needs to tackle. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
ARM Holdings PLC  -
BP PLC518.20 GBX0.33
GlaxoSmithKline PLC1,430.00 GBX1.61
Kingfisher PLC309.00 GBX1.25
Sage Group (The) PLC630.80 GBX0.13
TUI Travel PLC  -
About Author Holly Cook

Holly Cook  is Managing Editor of