Jefferies upgrades Intertek to ‘buy’

In a broader note on the sector, Jefferies said that after a multi-year period of earnings and share price underperformance, it see the testing names as moving through an inflection point in 2024.

"We are increasingly optimistic on growth and believe margins have troughed, with increasing confidence on recovery," it said.

"Valuations currently sit at the bottom of historic ranges suggesting an attractive risk reward.

"We upgrade Intertek to buy and reiterate our buy on Bureau Veritas as preferred ways to play the sector."

Jefferies said its new price target for Intertek suggests more than 20% upside and where it sees the business as best exposed to key themes around assurance, ESG and consumer recovery.

Jefferies said it has updated EPS forecasts for FY24-25 by 2-4%, driven by increased confidence on both the growth outlook and margin recovery at Intertek.

"As discussed in this note, recovery in consumer products, incremental growth in sustainability/ESG assurance as well as exposure to ongoing industrial investment and electrification we think can support a stronger outlook for growth over the next 3+ years," it said.

"We update for FX which looks likely to remain a headwind in FY24 based on current rates. We see improved traction on management cost initiatives as well as positive mix benefits which we think can support margins, and we now forecast 90bp improvement over FY24-25e to 17.3%. Our new EPS estimates now sit 2-4% above consensus."

At 1345 GMT, the shares were up 0.8% at 4,495p.