A City analyst has claimed that forecasts of financial performance at the major quoted pub companies are unreliable at the moment in the light of the consumer slowdown, writes Paul Charity.
Paul Hickman, of KBC Hunt, reports he has “rigorously stress-tested” his valuation models in the context of current economic conditions.
He has produced a buy verdict on Enterprise and Greene King but rates Mitchells & Butlers, JD Wetherspoon and Punch Taverns as a sell.
Hickman said: “Forecasts can no longer be trusted. Economic indicators point to a consumer recession of similar seriousness to that of 1990-92. Indeed, we are not far from that economic landscape.
“As a result, forecasts are unreliable and it is necessary to find other techniques to differentiate leisure companies that have been indiscriminately marked down by the market.
“This is a scenario where pubs’ defensive qualities are desirable while the cyclical ones are unattractive.”
Hickman rates shares of Fuller Smith & Turner and Marston’s as hold stocks.
