RBC upgrades Bodycote after recent share-price slump

RBC Capital Markets has upgraded its rating Bodycote following recent weakness in the share price, saying that the stock looks "attractive value" in spite of end-market headwinds.

The broker lifted its position on the stock from 'sector perform' to 'outperform', but cut its target for the shares from 720p to 700p.

RBC highlighted that the share price of the heat treatment and thermal processing services provider has dropped by 21% over the past three months alone, compared with the wider sector which has gained 2%.

"There are trading headwinds with pressures in auto, aerospace and defence, and general industrial - this prompts us to cut our 2024/2025 EPS forecasts by 5-6%," the broker said, but noted that end markets should improve in 2025.

RBC said that an upcoming company event in December could be a "positive catalyst" for the stock, with new chief executive Jim Fairbairn, who took over in May, hosting his first capital markets day on 12 December.

"Even on reduced forecasts the share looks attractive value, and with margins still below pre-Covid levels and a new CEO set to host a December CMD that could point to incremental self-help, we see this as an attractive entry point."

The stock was up 0.7% at 567p by 1612 BST.