Rotork, Spectris and Halma slump on HSBC downgrade

Rotork, Spectris and Halma were under the cosh on Tuesday after HSBC downgraded its ratings on both stocks as it took a look at UK engineers.

The bank cut Rotork to ‘reduce’ from ‘hold’ and trimmed the target price to 180p from 200p, pointing to poor visibility and margin pressures.

It said the company faces further margin pressure in its key oil and gas exposed business division.

It said while the recent rise in oil prices lowers the risk for Rotork’s high oil and gas exposure, high exposure to mid/downstream activities will only see the positive impact in the longer term.

HSBC downgraded Spectris to ‘reduce’ from ‘buy’ and cut the price target to 1,700p from 2,000p, saying the stock has reached the top of its valuation trading range since its recent strong rally – it’s up 29% since the 2015 results on 16 February.

In addition, it said weak trading patterns could persist in the near term while acquisition activity to fuel growth may be limited.

Still, HSBC said it continues to believe Spectris will be a beneficiary of growing global productivity demand, coupled with acquisition potential to enhance earnings in the long term.

Finally, the bank downgraded Halma to ‘hold’ from ‘buy’ saying the valuation now looks too rich, but lifted the price target to 1,050p from 975p.

HSBC said Halma has proved resilient through the economic cycle with demand driven by increasing health, safety and environmental legislation.

It also highlighted the group’s compelling track record and noted it has delivered double-digit earnings compound annual growth rate over the last 20 years with at least a 5% dividend increase every year for the last 36 years.

At 1000 BST, Rotork shares were down 1.9% to 201.30p, Spectris was off 2.3% to 1,954p and Halma was down 1.7% to 1,075p.