Deutsche Bank downgrades Smiths to 'hold'

Deutsche Bank downgraded engineer Smiths Group to ‘hold’ from ‘buy’ on Tuesday, cutting the price target to 1,665p from 1,740p, saying it was time to take a step back.

The bank reduced its EBITA assumptions for the company by 3% for both 2019 and 2020 and its earnings per share forecasts by 5% and 4%.

"Following a change of management in 2015, a renewed strategy, increased investment and portfolio rationalisation there was a view that Smiths was evolving. While this is still the case in certain respects, it has relapsed into the earnings downgrade cycle that was prevalent 2012-2016," DB said.

Smiths said last week that it returned to growth last year as underlying revenue increased but currency swings and reclassification of costs sent reported annual profit down 8%.

Underlying revenue rose 2% to £3.2bn in the year to the end of July though reported revenue fell 2%. Reported operating profit fell to £544m from £589m.

At 1315 BST, the shares were flat at 1,501p.