G4S shares fall as Jefferies cuts target price

G4S shares fell on Monday as Jefferies reiterated a ‘underperform’ rating on the stock and cut its target price to 157p from 160p.

Jefferies said a slowdown in emerging market economies, the Brexit vote and tragic events in Orlando have created stumbling blocks for the security sector.

“The security industry has proven resilience and G4S is commendably refocusing on a higher quality core, but recent events create headwinds,” Jefferies said.

Jefferies downgraded its earnings per share estimates for 2016 and 2017 by 7% and 8% respectively. The broker said risks include political changes, delayed bid timetables, contract mobilisation and dislocation in some emerging market countries as global carry trades unwind.

Jefferies suggested a £240m equity placing would derisk the balance sheet and allow attention to return to long-term value drivers.

"A 9.99% placing at 157p would raise c.£240m, reducing net debt/EBITDA to 2.7x at year end and a far more comfortable 2.2x in December 2017."

Shares fell 2.60% to 179.70p at 1016 BST.