The growing number of UK business services companies covered by Berenberg raising their FY27 earnings estimates suggests resilience across the coverage universe.
Around two-thirds of the 36 UK business services companies covered by Berenberg have raised their FY27 earnings estimates. Average share prices have generally risen year to date, suggesting an overall improvement in market sentiment. 21 companies in the coverage universe have raised their FY27 estimates.
The sector's average FY27 forecast price/earnings ratio is 11.2x, with a free cash flow yield of 9.2% and a dividend yield of 3.7%. This suggests a discount to the FTSE All-Share, which trades at a P/E of 12.4x and has a dividend yield of 3%.
Over the past year, 16 companies completed or are pursuing M&A, while the same number are conducting share buybacks. Financially, average net debt has remained at 0.8x the latest EBITDA.
Berenberg noted that the returns of its 9 top picks as of January were only 2.4% year to date, and said that adding energy services companies to its coverage had increased the number of outperforming picks.
It raised the target price for RS Group from 600 pence to 650 pence, for RWS from 170 pence to 190 pence, and for SThree from 250 pence to 330 pence. DCC and Mitie, meanwhile, were downgraded from Buy to Hold.