Source: Sharecast
Rentokil reported its third-quarter revenue and growth figures in late October, and Berenberg noted that while the stock rallied due to accelerated organic growth of 1.8% yoy in US Pest Control, up from 0.3% year-on-year in Q2, it said the beat was driven by strong one-off jobs, likely due to a warm summer in the US, which will reverse to more normalised levels in Q4, in its view.
Berenberg also noted that organic growth from contract revenue continued to appear "weak", while International division organic growth fell short of expectations.
"The reporting period solidifies our bearish view of Rentokil, with upcoming headwinds to growth and profitability through the resumption of integrating Terminix likely to lead to pressure on employee retention, alongside a need for investment to improve service levels," said Berenberg.
"Our 'sell' call has clearly been at odds with investor sentiment. In our view, strategies employed thus far by Rentokil cannot meaningfully move volume growth into positive territory, as strategies do not relate to the improvement of service levels, essential to the bull thesis."
Elsewhere, Shore Capital downgraded clothing and homeware retailer Next to 'hold' from 'buy' on Tuesday as it said it was a premium company, but at a premium valuation.
Shore Cap noted that following another very strong quarter, Next has seen its share price rise to around £143, now up nearly 50% since the start of the year following four upgrades to FY26F guidance.
"While we remain firm fans of the company under Lord Wolfson’s excellent leadership, with the current strength of the shares and high valuation premium (CY26F PER of 18.5x) we take pause for breath and downgrade our recommendation to hold with a raised fair value of 14,750p (up from 14,000p)," the broker said. "To be clear, this is not a top-slice stance but rather a case that we would no longer suggest an increase in holdings with shares priced at the current level."
Shore Capital also said on Tuesday that it was lifting its FY26 revenue forecast to £6.7bn from £6.6bn and its pre-tax profit forecast to £1.14bn from £1.11bn.
Over at Canaccord Genuity, analysts hiked their target price on copper mining firm Atalaya Mining from 580p to 830p on Tuesday as it aligned its methodology with its broader base metals coverage.
Canaccord Genuity said Atalaya has performed strongly YTD, outperforming the copper miner average due to good operating performance and leverage to the copper price. It also noted that the firm was trending toward the lower end of its cost guidance range, assisting in cash flow generation at a time when copper prices are showing strength.
Going forward, Canaccord Genuity sees Atalaya unlocking "significant value" with higher grade material from the San Dionisio pit, processing of polymetallic material at the plant via the construction of a zinc/lead circuit, and potentially a positive decision for brownfield copper project, Touro, located in the Galicia region of northwest Spain.
The Canadian bank added that ongoing trade tensions were likely to retain "a degree of headline risk" in the market, and stated that longer-term, it sees the potential for "strategic stockpiling" by governments to protect against supply chain disruptions.
"We have updated our model for the 3Q25 operating update, and we increased our copper price deck given recent strength. We assume US$4.85/lb in 4Q25 and US$5.19/lb in FY26 (previously US$4.50/lb). We now assume costs will come in at the bottom of the guidance range (~US$2.60/lb cash costs, ~US$3.10/lb AISC). Given the lower recoveries in Q3, we have also taken the opportunity to risk 2026 production with a more gradual step up in output to 55kt (previously 58kt). The combination of these changes has led to a +14% and +24% increase in our EBITDA estimates in FY25E and FY26E, respectively," said Canaccord, which has a 'buy' rating on the stock.
