Broker snap: Aggreko's a tough call, says Investec

1st Aug 2013 10:41

Investec has retained its 'add' recommendation and 1,900p target price for temperature control and power supply company Aggreko, but admitted that it is a 'tough stock to call'.Aggreko's share price slumped on Thursday morning after the firm said that group revenue rose 4.0% in the first half but pre-tax profit slipped 2.0% and margins weakened.The Local business delivered strong underlying revenue growth and margins strengthened, while Power Projects was subdued with revenues flat and margins down.While firm maintained its full-year expectations, fleet capital expenditure guidance was reduced from £260m to £240m. Investec said that there seems to be "more caution around FY14 in our view" and the reduction to capex forecasts "is often a guide to group thinking for the following year".Investec analyst John Lawson said: "Aggreko is a tough stock to call at present with earnings dropping back this year and limited growth next year (and current market indicators in Power Projects remain subdued).""Aggreko is likely have a weaker day today in our view, especially with reduced fleet capex guidance and there is still a subdued message around the Power Projects business. Cash remains strong, however, and the Local Business continues to perform well."The stock was down 5.34% at 1,685p by 10:31.BC