LONDON (ShareCast) - Expectations that the current economic turmoil will boost bus use at the expense of trains prompted JP Morgan to raise its target prices on Arriva, National Express and Stagecoach.

Its target price on Arriva rises to 1,341p from 1,164p, on National Express to 1,341p from 1,164p and on Stagecoach to 295p from 261p.

JPM notes that Arriva, on which it keeps its ‘overweight’ rating, has the lowest rail exposure in the sector.

“We see the shares as the most defensive of the UK public transport operator group, with no London-orientated rail exposure,” the broker said.

It also keeps its ‘overweight’ recommendation on National Express, noting that it trades at a price/earnings ration below its peer group with above average earnings growth.

However, the broker is ‘underweight’ on Stagecoach, noting that it has high rail exposure in the short term.

JP Morgan has lifted its target price on the aircraft services group BBA by 2p to 103p to reflect the stronger dollar, but remains ‘underweight’ on the stock given the economic risks it faces.

Noting BBA’s strong exposure to the US, JPM estimates that for every 1 cent gain the dollar makes against the pound, its operating profit rises by £0.5m.

However, these benefits may be eclipsed by deteriorating economic trends in the next year, the broker says, such as airlines operating fewer flights.

Altium Securities has raised its rating on engineering design software provider Aveva to ‘buy’ from ‘hold’ on valuation grounds.

The broker notes that shares in Aveva have fallen by more than a quarter since the beginning of the month in line with general turmoil and the falling oil price.

Aveva’s services are used extensively by the oil industry.

The fall has been excessive given Aveva’s exposure to relatively resilient Asian economies and the defensiveness of some of the markets it operates in, Altium said.

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