Petrofac hit by Credit Suisse downgrade after profit warning

Credit Suisse has cut its recommendation on Petrofac from 'outperform' to 'neutral' in the aftermath of a profit warning from the oilfield services group that sent shares tumbling on Monday.

Petrofac said that 2014 net profit would come in at the lower end of the guided $580m-600m range and fall to just $500m in 2015 due to depressed oil prices and the timing of deliveries.

Credit Suisse said that the 2015 guidance came in 27%, or $175m, below the consensus forecast.

"Although the moving parts in the guidance are relatively clear, we feel the main sentiment driver will be the admission that project execution has fallen well short of management's exalted record, lowering confidence over the quality of future earnings," said Credit Suisse analysts David Thomas and Jason Turner.

"With this in mind it seems doubtful in our view that a third profit warning will be seen as setting a floor for a buying opportunity. We lower our rating to 'neutral'," they said.

The stock finished 26% lower at 877p per share, which Credit Suisse says suggests the market is now valuing Petrofac at 9.5 times 2015 forward earnings - the same multiple as the wider sector.

The bank has slashed its target price for the shares from 1,250p to just 960p.

Petrofac was trading down a further 4.7% at 836.38p by 10:25 on Tuesday, with downgrades from Investec and Deutsche Bank also weighing on the stock.