Weir boosted by JPMorgan upgrade

Engineer Weir got a boost on Monday as JPMorgan Cazenove upgraded the stock to ‘overweight’ from ‘underweight’ and lifted the price target to 1,775p from 1,220p, highlighting 18% upside to the revised price target.

JPM said that despite the lack of earnings upgrades, Weir has been one of the better performing stocks in its industrial universe in recent months on the back of rising oil prices.

“We now suspect Weir is close to the point of inflection in terms of its operating profit growth. We regard the new data on drilled but uncompleted wells (DUCs) as encouraging.

“We believe this together with the increase in the rig count results in the risk to consensus earnings forecasts for Weir shifting to the upside.”

JPM said that while the rig count is down around 40% year-on-year, it is up 25% from the May 2016 low, and recently, capex spending plans from a growing number of oilfield service companies have been raised.

“New data on DUCs points to a 10% decline in recent months. Given the aggressive cost cutting, the operational leverage from rising volumes is likely to be high. We have raised our revenue forecast and operating profit forecast for 2017E by 5% and 56%, respectively.”

JPM also said it has lifted its 2017 sales forecasts for the group by 3% to and operating profit estimate by 10% on the back of an improving aftermarket outlook for the Minerals and Oil & Gas divisions.

At 0848 BST, Weir shares were up 5% to 1,585p.