Broker tips: Astra, Intertek, Petrofac

'Buy on weakness' is the recommendation of Panmure Gordon which remains a fan of AstraZeneca even after the company announced a disappointing trial result for its lung cancer treatment Recentin.

'We expect the stock to come under pressure but we advocate buying on weakness as the mid-term guidance story remains intact, because Recentin was a high risk development,' argues analyst Savvas Neophytou.

Recentin went head to head with Roche's Avastin product in the trial and 'did not meet the pre-specified criteria for the primary endpoint of non-inferiority in progression-free survival,' a statement from Astra disclosed.

Panmure Gordon noted that the test was carried out on first-line Metastatic Colorectal Cancer and that there was no statistically significant difference between treatment arms on the efficacy endpoints examined, which it found encouraging, 'given how strong Avastin is in this population.'

The broker acknowledges, however, that better news will be needed in order for the drug to achieve registration status. 'It should be noted that a second pIII trial (HORIZONII) is still ongoing and could well emerge with positive data, so we are not making any adjustments to forecasts yet,' Neophytou said.

The broker is expecting some downgrades to profit forecasts from other brokers as a result of the Recentin development but 'with launch costs deferred, we do not expect significant downgrades on the bottom line.'

Panmure Gordon concedes sentiment is likely to be adversely affected by the news but suggests that with the price/earnings ratio standing at a lowly 8.2 'one would argue failure is priced in.'

The broker has a 'buy' recommendation on the stock and a price target of 3300p.

Results from Intertek were slightly ahead of expectations, according to Charles Stanley, which has a 'hold' recommendation on the product quality and safety tester.

Though the group looks well placed to thrive over the longer term the broker thinks the current share price appears to take this factor into consideration.

'At the end of 2009 net borrowings had fallen to £201m representing a net debt/EBITDA [earnings before interest, tax, depreciation and amortisation] ratio of 0.8x. Clearly, this leaves plenty of firepower for bolt-on acquisitions,' Charles Stanley analyst Tony Shepard postulates.

'Although organic growth will be low in the first half of 2010 due partly to a strong comparative, growth is expected to pick up in the second half and the favourable business drivers are expected to return the Group to high single digit growth rate in 2011,' Shepard added.

Petrofac was the best performing blue-chip stock on Monday morning after the oil fabrications giant reported results that were ahead of expectations.

In mid-December the company had indicated that net income for 2009 would be at least $330m and it comfortably beat that figure with net income of $353.6m.

Last week the company announced plans to hive off its UK Continental Shelf assets into a new company, EnQuest, to be formed with Swedish oil and company Lundin Petroleum. Oriel Securities remains of the views that this deal will lead to an 'upward re-rating' as a result of lower exposure to exploration and production.

The broker thinks the shares will hit a range of 1000p - 1050p once the EnQuest deal goes through and has an 'add' recommendation on the shares.

Evolution Securities takes a more lukewarm view and reckons investors should wait until the demerger takes place before considering whether to invest. It has a 'neutral' rating on the stock.