Credit Suisse starts Weir, Rotork at 'outperform'

Credit Suisse initiated coverage of Rotork and Weir at ‘outperform’ as it took a look at the pan-European capital goods sector.

The bank gave Rotork a 230p price target. “We see Rotork as a high-quality company and while we do not discount a recovery in end markets, we see continued support for earnings from ongoing acquisitions and FX.”

In addition, the bank said it sees scope for continued consolidation in Process Automation, adding that Rotork is in an attractive asset given its relatively high market shares in niche markets.

CS started Weir with a 1,800p price target. The bank said its positive view was based on the potential for earnings upgrades driven by US onshore oil & gas and FX.

“On valuation we think stability in the mining business provides support and the shares are not pricing in a demanding recovery for O&G.”

CS pointed out that Weir has historically correlated well with the rig count, where its US team forecasts 28% growth in 2017.

It also said Weir has broad currency exposures and is most leveraged to the US, Canadian and Australian dollars, which have strengthened materially.

Credit Suisse started coverage of IMI at ‘neutral’ with a 1,020p price target. It said that given the company’s historical below-sector average organic growth of 1.5% in 2007-15, the focus on investment in IT and improving time to market /customer service is reassuring.

“However, in 2017 we see limited recovery in end markets, high-margin businesses (Critical aftermarket) under pressure and against that backdrop we expect 2017 to represent a transition year.”

At 1108 BST, Weir shares were up 2.5% to 1,574p, Rotork was up 1.4% to 218.20p and IMI was up 0.3% to 1,087p.