Broker tips: WPP, Paragon Banking, CRH

(Sharecast News) - Advertising and media group WPP's share price was weighed down on Wednesday by a ratings cut by JP Morgan from 'overweight' to 'neutral' and slashed its target price for the stock from 1,170.0p to just 850.0p.

As part of its 2024 outlook for the listed media sector, JP Morgan said it was maintaining a "defensive bias" amid a slowing macro environment.

"The outlook for 2024 is very similar to that 12 months ago. Economies, consumers and earnings were resilient in 2023 and the forecast economic slowdown has been rolled into 2024," the bank said. "We maintain a defensive bias as we start the year as we expect higher inflation and interest rates to finally catch up with consumers and earnings."

JP Morgan said it was downgrading WPP due to slowing US macro conditions and share losses.

RBC Capital Markets upgraded Paragon Banking Group on Wednesday to 'outperform' from 'sector perform' and hiked its price target on the stock to 850.0p from 700.0p.

"One of our key takeaways from this reporting season was that we had underappreciated the quality of PAG," it said. "In our view, the bank has irresistible momentum going into next year."

RBC said operating trends were "impressive", and there were potential catalysts from a softening of Basel 3.1 and IRB approval.

"Do we prefer PAG or One Savings Bank here? It's a tough call, as OSB's valuation is more depressed, but PAG seems like the cleaner story going into 2024," it added.

CRH shares were given a lift on Wednesday by analysts at Deutsche Bank who reiterated their 'buy' rating on the building materials giant, citing "powerful long-term stimulus".

The bank decided to refresh its estimates for the company to reflect its change of primary listing from London to New York, but kept a positive recommendation with the shares trading at an enterprise value-to-EBITDA multiple of around 8x, which it said was "attractive given its market-leading positions".

Deutsche Bank also kept a 6,012.0p target price on the stock, representing a significant upside from Wednesday's 5,262.0p level, as it said CRH's skew towards the US market was the main driver behind the upbeat outlook, where government support remains strong, with the Americas division accounting for around three-quarters of group EBITDA on 2024 estimates.

"Stimulus packages now point to $2trn of federal spending over ten years. The largest component, the IIJA (total spend $1.2trn) provides the strongest ever support for major projects, lifting road and highway funding by around half. In addition, it underpins >$200bn of water, power and technology infrastructure," Deutsche Bank said. "CRH is arguably the biggest beneficiary of this."