LONDON (ShareCast) - Morgan Stanley prefers other stocks in the hospitality sector, the broker said as it downgraded its rating on Holiday Inn owner InterContinental Hotels Group to ‘underweight’ from ‘equal-weight’.

InterContinental’s first half results raised concerns about cost inflation and slower opening rates, Morgan said.

The broker, which also lowers its target price on the stock to 810p from 980p, prefers the Premier Inns owner Whitbread.

Hotels tend to underperform while the average revenue per room deteriorates, only recovering when the rate of change improves, Morgan noted.

Shares in Intercontinental would be more attractive if they moved back near lows of 600p, it added.

The dollar’s rise against sterling prompted JP Morgan to raise its target price on medical devices group Smith and Nephew to 610p from 585p.

However, the broker stays ‘underweight’ on Smith and Nephew.

The company’s recent results fell short of expectations in two areas; US hips and wound therapy, JPM noted.

UBS has lowered its rating on Logica to ‘sell’ from ‘neutral’, saying Thursday’s results showed stagnant margins at the software group.

The broker also noted that higher subcontracting levels were not a positive sign.

However, it noted Logica’s recovery in the UK and lifted its target price on the stock to 105p from 97p.

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