UBS downgrades Weir, says good news priced in

UBS downgraded Weir to ‘neutral’ fro ‘buy’ but lifted the price target to 1,830p from 1,500p saying much of the positives are now priced into the stock.

The bank noted Weir is supported by a recovering oil price (and US rig count) as well as FX.

“The key driver is the oil & gas recovery, in our opinion, and we do expect a strong medium-term recovery. However, we are downgrading to neutral as a lot already looks to be in the price for this – our analysis suggests that around 60% growth in the oil & gas business sales is already being priced in.”

UBS said this is above its 2017-18 estimates, but to give context noted that it would only be around a third recovery towards the 2014 peak.

The Swiss bank upped its 2016 earnings per share estimate by 8% to 66.8p, its 2017 estimate by 12% to 77.2p and its 2018 forecast by 11% to 88.3p. It pointed to recent supportive FX moves and said it now assumed a stronger 2016 performance in Minerals, which has stabilised well in recent trading.

In addition, it assumes a slightly faster oil & gas recovery over 2017-18E given the more supportive oil price backdrop.

At 0830 BST, Weir shares were down 1.1% to 1,715p.