Broker snap: Consensus downgrades in order at Weir, says Jefferies

4th Nov 2013 10:56

Jefferies said it expects 2013 and 2014 consensus estimates for Weir to be cut by five to six per cent after the engineering firm's profit warning on Monday, as it retained its cautious view on the stock.Third-quarter trading was "very mixed", according to the broker, with sales and profit below expectations due to further project delivery delays in the Minerals division and a slower-than-expected recovery in upstream Oil & Gas markets.Meanwhile, order intake at the Power and Industrial division fell sharply. While Weir still expects to deliver revenue growth this year, Jefferies said: "We now believe that management needs to make some serious decisions as to whether this business remains within the group."The company is now guiding to a full-year profit before tax of £425-435m on a constant currency basis with margins more or less unchanged from last year. Reported profits are expected to be around £8-12m lower due to the translation impact of recent weakness in the US and Australian dollar and most emerging market currencies.  Jefferies said: "We expected Weir's share price to be impacted by today's update, but not by 8%, and we feel that this highlights the negative sentiment towards the group (others have got away with mid-single digit downgrades recently). "Despite the opportunity of 'landmark' contract wins in Oil & Gas and Minerals, it also highlights the concerns that the market has regarding any potential recovery in FY14, we feel, and this applies to all divisions."The broker said it is "happy to stay at 'hold'" as the current valuation gives "only modest downside protection we feel".BC