Bank of America downgrades Spectris due to macro headwinds, trims target

Spectris was more cyclical than most investors might think, analysts at Bank of America cautioned as they downgraded their recommendation on the shares in anticipation of a slowdown in demand in the company's end markets over the first half of 2020.

BofA downgraded the shares from 'neutral' to 'underperform' due to ongoing weakness in end markets like automobiles and industrial, while trimming its target price from 2,760.0p to 2,750.0p.

"Spectris's historical growth suggests the group has trended in line with some of the sector's most cyclical businesses (e.g. Sandvik, SMS, SKF and Rexel) over the cycle," the broker said.

"We see risk of a sell-side downgrade cycle in the front half of 2020 as consensus estimates appear overly optimistic on growth recovery."

On a more positive note, the precision instrumentation and controls manufacturer's plans to streamline its portfolio was "attractive" but long-dated.

Furthermore, the benefits of those plans were likely already reflected in the share price - but not the near-term macro headwinds.

And yet, BofA said, recently the stock had "strongly" outperformed its benchmark, the Dow Jones Stoxx 600's sub-index for Industrial Goods and Services.