Spectris slumps after Merrill downgrade to 'underperform'

Bank of America Merrill Lynch downgraded its stance on shares of Spectris to 'underperform' from 'buy' on Friday, cutting the price target to 2,700p from 2,900p as it pointed to a loss of momentum.

"Whilst we hold management in high regard and think the new strategic plan simplifies the equity story, this is now reflected both in valuation and consensus in our view," the bank said.

It said that following the 15% increase relative to the UK capital goods sector year-to-date, the balance of risk looks skewed to the downside, especially when second-half growth is likely to decelerate.

"Add in the limited visibility on Industrial Solutions disposals in near term, and we think this will delay the re-rating potential of simplified portfolio."

Merrill noted that the stock now trades on a circa 13x 2020E EV/EBITA multiple, which is a sector premium of about 20%, despite top-line and earnings per share growth now sitting below the sector averages for 2019-20 estimates.

At 1000 BST, the shares were down 4.5% at 2,757p.