Shares in British luxury clothing manufacturer Burberry gain 7.9percent as a revenue update beat battered market expectations after a profitwarning last month, triggering a recommendation upgrade by Seymour Pierce.
Burberry is the biggest contributor to early FTSE 100 gains thismorning, adding 1.370 net points to the blue-chip index, and traded its full-dayvolume average within the first hour of trading.
Commenting on the revenue update, Ed Woolfitt, head of trading at Galvan,says: "Not as bad as the profit warning would have had us believe."
"I think a classic case of over playing the negative ahead of theannouncement so the announcements look better than it really is."
Burberry's share price lost 28 percent since the profit warning last month.
"While there is still uncertainty over the cost of bringing in-house thefragrance license and over the impact the global economic slowdown will have onluxury spending, we are reassured that demand has not fallen off a cliff and sobelieve the shares have been oversold," Seymour Pierce says in a note, upgradingthe stock to "buy" from hold".
"We still consider Burberry a strong long term growth story with significantgeographical and product mix opportunities."
Despite the slowdown in sales, revenues remain 6.8 percent above their5-year historical average and its earnings quality score -- a gauge of thesustainability of earnings based on past performance -- of 76 out of 100 isbetter than French peer LVMH and inline with Germany's Hugo Boss, according to Thomson Reuters Starmine data.
Burberry's market implied five-year compound annual growth rate is alsoinline with peers at around 5 percent.
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