Wednesday preview: UBS upgrades Northgate ahead of results

Final results from commercial vehicle hire specialist Northgate are due on Wednesday morning, with the focus likely to be on the final few months of trading.

The firm announced in mid-March that tough economic conditions in both the UK and Spain would mean that the results for the 12 months to the end of April would be "towards the lower-end of the range of market expectations".

Since then, the stock has tanked, from the 250p mark to 175.75p as of Monday's close.

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UBS on Tuesday upgraded its rating on the stock from 'neutral' to 'buy', providing a small boost the shares. The broker said that Northgate's stand-alone UK business is worth 186p per share which leaves Spain currently being priced at a small negative per share value - "We think this is too harsh even in spite of the fairly dire macro outlook there."

Analysts suggest that with the macro outlook in Spain getting worse, not better, management could look to ("or be forced to") run down its fleet significantly. "Given asset sales are crystallising book value but the stock trades well below book, this should release value in our view."

UBS is forecasting Northgate to have generated £676.9m in revenues in the year to end-April, down from the £715.5m reported the year before. Earnings before interest and tax (EBIT) are expected to fall from £105.6m to £103.9m, while earnings per share are predicted to rise from 28.94p to 31.63p.

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