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Broker tips: IAG, Unilever, RBS

Alexander Bueso

LONDON (ShareCast) - (ShareCast News) - JPMorgan Cazenove upgraded International Consolidated Airlines Group to 'overweight' from 'neutral' and lifted its price target to €9.55 from €8.50. JPM highlighted IAG's potential to expand profitability beyond the 1-2% unit cost savings discounted in the bank's medium-term estimates.

The bank also noted lower susceptibility to the competitive threats faced by its legacy peers and successful inorganic growth and valuation.

The bank said it remains positively biased towards the higher-growth, lost-cost carriers Ryanair, EasyJet (Other OTC: EJTTF - news) and Wizz, all rated 'overweight', versus the strategically-challenged Air France-KLM (Other OTC: AFLYY - news) and Lufthansa, both rated 'underweight'.

Unilever (NYSE: UL - news) shares rallied as Berenberg lifted its stance on the stock to 'buy' from 'hold' with an unchanged price target of 3,050p.

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"Our forecasts do not assume a quick rebound in emerging-market growth, but we believe Unilever is past the trough of group organic growth. It (Other OTC: ITGL - news) provides margin momentum, improving return on invested capital and free cash flow generation, with net M&A increasingly accretive," said Berenberg.

However, despite forex and inflationary pressures, Unilever consistently delivers positive reported earnings per share growth. It noted that since 2002, Unilever's reported EPS growth has been positive every year, except 2009. Berenberg forecast a 9% compound annual growth rate to 2017.

Royal Bank of Scotland (LSE: RBS.L - news) got a boost on Friday from a couple of upbeat broker notes.

RBC Capital Markets upgraded RBS to 'sector perform' from 'underperform', keeping the target price at 350p, saying it sees 11% upside to the share price.

RBC (Other OTC: RBCI - news) said its 'underperform' rating was based on its view that the original "bad bank" was too small and the residual corporate and institutional division, art 35% of the group, would not generate returns above the cost of equity and nor would the group.

The stock also benefited from positive comments from Morgan Stanley, which replaced Barclays (LSE: BARC.L - news) with RBS in its preferred names in the sector.