Broker snap: Credit Suisse downgrades estimates for Weir

10th May 2012 10:57

Credit Suisse has slashed its target price for engineering group Weir by over a quarter following this week's first-quarter statement.The broker has cut its earnings per share (EPS) forecasts for 2012, 2013 and 2014 by 7%, 14% and 15%, respectively. The target price comes down to just 1,700p, from 2,350p previously."Drivers of our downgrade are solely Upstream Oil & Gas derived and reflect more cautious management guidance and our view that a pricing headwind will materialise for both pressure pumping OE and aftermarket in 2013E," the broker said.However, Credit Suisse has maintained its outperform rating on the stock despite no year-on-year earnings momentum in current consensus (CC) forecasts for 2013, "the historic driver of stock performance".The broker views CC 2013 EPS estimates as factoring in a very cautious scenario incorporating both lower pressure pumping prices and Oil & Gas margin erosion. It also thinks that CC estimates could increase as visibility improves.Lastly, the broker notes that some 56% of group earnings before interest, tax and amortisation (EBITA) are derived from a combination of Power & Industrial and Minerals with both positioned to deliver margin expansion between 2012 and 2014.Shares were trading 1.06% lower at 1,498p by 11:00 on Thursday.BC