Rotork boosted by RBC upgrade

FTSE 250 engineer Rotork got a boost on Thursday as RBC Capital Markets upgraded its stance on the stock to ‘sector perform’ from ‘underperform’ and lifted the price target to 200p from 165p.

It said that following recent underperformance and a sector re-rating, the shares no longer look as expensive relative to peers.

The stock has underperformed the UK industrial goods sector by 7% year-to-date and 23% since RBC’s last update at the end of June.

“In addition, steady consensus downgrades have left expectations at a more reasonable level, suggesting a negative surprise is less likely in the near-term.”

The bank said that on an underlying basis, consensus has seen a steady move down through the year, with estimates for 2016 now appearing achievable. Consensus 2016 margins are now at 19.9%, having been as high as 21.5% earlier in the year, RBC said.

Still, the bank said it was too early to rule out another move lower in the shares. With the oil price still at relatively low levels and unstable, and margin headwinds from pricing and mix, there are clearly challenges ahead.

At 1220 BST, Rotork shares were up 4% to 216.70p.