Jefferies cuts DS Smith to ‘hold’

Jefferies cut its rating on DS Smith to ‘hold’ as the broker said there were no events in sight to prompt a rerating of the shares.

Analyst Cole Hathorn upgraded DS Smith to ‘buy’ in early April based on expected demand for the company’s cardboard packaging boxes from food and consumer goods sellers.

But Hathorn said DS Smith’s first-half results were disappointing, including the scrapping of the interim dividend, prompting him to cut his earnings forecast for 2020-21 by about 10% due to cost and pricing pressures. This pushes back plans for debt reduction that could have put the company in a position to make capital investments or buy smaller rivals, Hathorn said.

Hathorn switched his rating back to ‘hold’ from ‘buy’ and cut his price target on DS Smith shares to 310p from 350p. The company’s shares fell 3.2% to 282.25p at 10:52 BST.

“We lack conviction for near catalysts in the stock to rerate in the absence of wider P&P sector pricing upside,” Hathorn wrote in a note to clients.