Broker tips: BP, Ashtead, Chemring

Analysts at Barclays stood by their 1,000.0p target price for shares of BP ahead of the oil major's next capital markets day.

The analysts said BP would likely provide a 'deep dive' on restructuring efforts in the upstream operations and low-carbon bits of the portfolio over the past three years.

However, management was also expected to emphasise "just how much" BP's free cash flow was expected to grow in the back half of 2023 through the current asset base.

Indeed, at the 2020 CMD, when then chief executive officer set out the "Reimagining Energy" strategy, BP had perhaps not highlighted the potential of its core businesses, they said.

Nonetheless, no changes to the 2023 financial framework were anticipated, nor details on that for 2024.

They also highlighted how BP had been the only European outfit to register a decline in upstream operating expenditures over the preceding 12 months.

Berenberg has hiked its target price for the shares of Ashtead Technology by over a tenth after the subsea equipment rental and solutions provider raised its full-year guidance last week.

"We continue to like the stock given Ashtead Technology’s structural growth potential, renewables exposure, strong market position, high margins and ambitious management team," the broker said.

The company reported on 4 September that first-half revenues were up 57%, while adjusted EBITDA surged 92%. It said the market outlook was buoyant, with customer backlogs at high levels, as it predicted full-year results would be "comfortably ahead" of previous forecasts.

Berenberg raised its EPS estimates for the next two years by 6-7%, given the combination of strong market conditions, good pricing and margin delivery.

Shares in Chemring dropped 5% on Tuesday after the company said that the timing of a key contract would determine whether it hits its full-year targets; but broker Shore Capital recommended investors to use any weakness in the stock as an opportunity to pick up shares.

The aerospace, defence and security tech group said it is waiting for the US Department of Defense to approve certain countermeasure deliveries, equating to £25m, that have already been manufactured but haven't yet been recognised on the top line.

"The US DoD is expected to grant approval subject to determination of the quality of raw material provided by a third-party supplier that is outside of the control of the group. The group is supporting all parties in resolving this matter," Chemring said in a trading update.

Nevertheless, analyst Jamie Murray from Shore Capital said, after speaking to management, he's satisfied it is "merely a timing issue".