FTSE 250 movers: Convatec recovers but Merlin loses its magic

London's mid cap index rose by 1.22% to 19,032.07 on Tuesday, with Convatec leading the charge.

Following its profit warning on Monday, medical equipment maker Convatec's strong recovery could not be quelled by JPMorgan and Goldman Sachs, who both cut their ratings of the company's shares to 'neutral' with target prices of 183p and 165p respectively.

"A second profit warning in 12 months, uncertainty around 2019 guidance, as well as further management change is likely to further dent investor sentiment, with limited catalysts in our view in the near to medium term," said analysts at JPMorgan.

The analysts added that what the company had been lacking in the two years since its initial public offering was "consistent execution".

Power generation company Drax rallied after announcing the acquisition of Scottish Power's portfolio of pumped storage for £702m.

The 2.6 gigawatt portfolio is expected, based on recent power and commodity prices, to generate earnings before interest, tax, depreciation and amortisation in a range of £90m-£110m from gross profits of £155m to £175m.

Drax said it had agreed a fully underwritten £725m secured loan to finance the deal, which includes four gas power stations in England, two hydro schemes and a pumped storage plant in Scotland.

The acquisition is expected to complete by the end of the year.

Defence and aerospace engineering contractor Meggitt surged as it upgraded its 2018 revenue growth guidance to 7% - 8% from earlier guidance of 4% - 6% as demand across its divisions strengthened.

The company said trading in the third quarter had been stronger than anticipated, with overall organic revenue growth of 6% driven by continued strong performance across the civil aerospace and defence market segments.

Operating margins forecasts remained unchanged at the lower end of the 17.7% - 18% range.

Attractions operator Merlin Entertainments dropped on Tuesday after it reported a disappointing performance from its Legoland parks in the key summer period, though this was offset by very strong trading from its other resort theme parks.

For the 40 weeks ended 6 October, Merlin reported 4.7% growth in group organic revenue year-to-date - or 2.6% growth at reported currency.

The company said that growth was primarily being driven by new business development, having launched two new brands during the period - Peppa Pig World of Play in Shanghai, and the Bear Grylls Adventure in Birmingham.

Broker Liberum reiterated their 'hold' rating and target price of 360p for the company's shares following the news, impressed by a "very strong" third quarter performance from resort theme parks offsetting the difficulties at Legoland and indicating that it expected trading conditions to improve as London's tourism recovers from last year's terror attacks.

Also falling was JD Sports, which was rated new 'underweight' at Morgan Stanley with a price target of 355p.

"JD Sports has a remarkable track record, but we have concerns on its recent acquisition of Finish Line. And we believe Nike and Adidas prioritising their 'direct-to-consumer' channels presents downside risk to the investment case," said analysts from the investment bank.

Independent geotechnical solutions specialist Keller Group also fell as Barclays cut their target price for the company's shares from 1,400p to 914p.

A note from Barclays stated that the reduction in the company's outlook in the Asia and Pacific region from guidance of a "small profit" to a £12-£15m loss was particularly "disappointing" in the light of recent positive feedback on attempted turnarounds in the region.

Market Movers

FTSE 250 (MCX) 19,032.07 1.22%

FTSE 250 - Risers

Convatec Group (CTEC) 161.65p 7.77%
Equiniti Group (EQN) 217.50p 7.67%
Safestore Holdings (SAFE) 531.00p 6.33%
Drax Group (DRX) 386.80p 5.68%
Meggitt (MGGT) 521.60p 5.48%
Capita (CPI) 129.10p 5.43%
Kier Group (KIE) 913.00p 5.31%
RHI Magnesita N.V. (DI) (RHIM) 4,070.00p 4.79%
Millennium & Copthorne Hotels (MLC) 491.00p 4.47%
Softcat (SCT) 783.00p 4.40%

FTSE 250 - Fallers

Merlin Entertainments (MERL) 341.20p -7.71%
JD Sports Fashion (JD.) 400.78p -4.26%
Plus500 Ltd (DI) (PLUS) 1,268.00p -3.65%
Kaz Minerals (KAZ) 486.20p -3.65%
BTG (BTG) 546.00p -3.11%
Premier Oil (PMO) 124.00p -3.05%
Metro Bank (MTRO) 2,612.00p -2.90%
Thomas Cook Group (TCG) 45.68p -2.89%
Keller Group (KLR) 647.00p -2.41%
Just Group (JUST) 82.20p -2.38%