Berenberg ups Wood Group to 'buy' after underperformance

Berenberg said the underperformance, which has left the shares down 7% year-to-date even after the recent bounce, has been driven by fears about cash generation, mostly due to the Amec Foster Wheeler acquisition.

"As cost synergies are delivered and legacy projects and exceptional integration costs roll off, we expect steady top-line growth underpinned by strong free cash flow, leaving the stock attractively valued," it said.

Berenberg said the business environment remains challenging, but the diversification of revenues through the acquisition leaves the company less reliant on any one end market, and able to shift resources into areas that are growing across upstream, downstream, power and the environment.

"Project execution is always a risk, but as the company focuses primarily on reimbursable work and smaller fixed-price projects, the risk profile should diminish," it said.

At 1045 BST, the shares were up 3.6% at 491p.