RBC Capital upgrades Hays, says share price drop is overdone
RBC Capital Markets upgraded Hays to ‘outperform’ from ‘sector perform’, saying the share price drop following the recruitment company’s results last week was overdone despite the slower growth outlook.
“Consensus forecasts now seems to be coming back to more achievable levels and while there are market concerns, driven by an uncertain economic backdrop, the stock has been hit hard. We feel the shares are beginning to discount these uncertainties,” it said.
RBC said the company's UK performance has clearly slowed of late and it expects this lower growth level to remain against tough comps in the short-term.
In addition, it said Australia remains volatile but with the mining/resources arena stabilising at the lower levels, it does appear in better shape, while Europe's momentum remains strong.
RBC cuts its target price to 150p from 160p as it downgraded its forecasts for the stock following the second quarter statement.
“However, the shares have fallen back from 173p in July and are now trading at a discount to this target. With a total return of 14%, as well as the potential for returns to shareholders in 2017E as the group returns to a net cash position, we move to outperform.”
At 0900 BST, Hays shares were up 1.3% at 137.60p.