Berenberg raises target price on Spectris

"Spectris has one of the strongest balance sheets in the sector and should finish the year with circa £75.0m net cash. With M&A increasing across the sector and share prices generally reacting positively to deals, we see this is a key upside catalyst should cash be deployed effectively," said Berenberg.

"Likewise, any divestments (eg Millbrook) to improve the portfolio mix could also be taken well, as could an easing of US trade tensions under a Democratic presidency. We do, however, look for further evidence that the group’s self-help savings can translate into higher margins."

Berenberg said it upgraded Spectris to 'hold' back in March on the grounds that its more diversified business model, net cash balance sheet and portfolio reshaping optionality would stand it "in good stead" against the challenging backdrop.

In one sense, the German bank said it was right, with shares broadly flat since. However, it also pointed out that trading had been "less resilient" than it had expected.

"As a result, with near-term risks remaining elevated and shares trading at a premium to recent history, we believe it is still too early to turn buyers, despite several medium-term attractions," said the analysts.

Berenberg also highlighted that it continued to prefer creating a similar "Spectris portfolio" through Bodycote, Electrocomponents and Oxford Instruments - all of which it had issued with 'buy' ratings.