Canaccord maintains 'hold' rating on Spirent Communications

Canaccord said Spirent's third-quarter update led it to reduce its above-consensus estimates back in November and stated that yesterday's full-year trading statement suggested that the mixed revenue trends had continued into the last three months of the year, with year-on-year growth slowing to 0.5% from a solid 7.5% in the first half.

The Canadian broker noted that Covid-19 had impacted demand from some lab and service provider customers, but also acknowledged that positioning/GNSS sales to the US government had encouragingly begun to pick up.

"Given last year's tough comps and Covid-19 lockdowns persisting, we expect 1H21 sales growth to remain low-single-digit % followed by an acceleration in 2H for ~4% full-year 2021 growth," said the analysts, who stood by their 250.0p target price on the stock.

"Strong cost execution coupled with a return to sustainable, 5G-fuelled, sales expansion have driven double-digit EPS growth in 2019 & 2020 and commendable margin improvement to ~20%. We expect more gradual margin improvement from here, meaning EPS growth will align more closely with expected mid-single-digit revenue growth from here."