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Morgan Stanley cuts Experian to ‘equal-weight’ as valuation “remains demanding and consensus is moving lower”

The US bank's analysts said: “With the shares having re-rated 25% over the last 12 months and upgrades unlikely we find it hard to be a buyer”

Credit checking
“We would advise profit-taking if the shares continue to move higher, until we get more clarity over the strength of the credit cycle,” they added

Morgan Stanley has downgraded its rating for Experian PLC (LON:EXPN) to ‘equal-weight’ from ‘overweight’ as the US broker thinks the credit checking firm’s valuation “remains demanding and consensus is moving lower.”

The broker left its price target for the FTSE 100-listed firm unchanged at 2,150p, with the shares currently trading at 2,387p.

READ: Experian profits edge higher on strong performance in North America

In a note to clients, Morgan Stanley’s analysts said: “Our relative Underweight call was based on risk to consensus FY20 estimates from decelerating organic growth as the credit cycle tightens as well as margin expansion disappointing expectations. This has, in part, materialised, albeit not to the extent we had anticipated.”

They pointed out that Experian’s guidance for underlying earnings (EBITA) in full-year 2020 suggests expansion on an underlying basis but on a 10-20bps (basis points) lower base versus the full-year 2019 consensus.

As a result, the analysts said, they are seeing consensus EBITA/PBT (profit before tax) forecasts for Experian moving 2%-4% lower compared to expectations ahead of the full-year 2019 results, which were released on 15 May

They added: “With the shares having re-rated 25% over the last 12 months and upgrades unlikely we find it hard to be a buyer.”

The concluded: “We would advise profit-taking if the shares continue to move higher, until we get more clarity over the strength of the credit cycle.”

Quick facts: Experian

Price: 2813 GBX

LSE:EXPN
Market: LSE
Market Cap: £25.55 billion
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