Spectris slumps on Goldman Sachs downgrade
Spectris was under the cosh on Tuesday as Goldman Sachs cut its recommendation to 'sell' from 'neutral' as it forecasts weak sector-relative growth, returns and cash conversion over the next two years despite the stock being valued at a premium to the sector.
Electronic & Electrical Equipment
9,423.07
12:14 05/11/24
FTSE 250
20,468.41
12:15 05/11/24
FTSE 350
4,510.81
12:15 05/11/24
FTSE All-Share
4,468.08
12:15 05/11/24
Spectris
2,470.00p
12:14 05/11/24
It noted that Spectris trades at a premium of about 8% to the European capital goods sector on 12-month forward EV/EBIT, versus a 5% discount historically.
Goldman, which slashed its price target to 2,200p from 2,600p, said the company's end market trends and FY18 results do not support the 15% year-to-date increase in the share price.
"While we see positives in new management’s restructuring plan, we believe any near-term benefits are likely to be offset by slowing growth, an uncertain capex backdrop and cost inflation," GS said.
It lowered its comparable 2019/20 EBIT forecasts by 12%/14% post results and said it's now around 10% below 2019 company-compiled consensus on underlying earnings per share.
Goldman said it expects Spectris’ comparable EBIT margin to decline to 150 basis points in 2019 and for this to be the year with the lowest return on invested capital post the Great Recession.
At 1330 GMT, the shares were down 3.4% to 2,502p.