Broker snap: Credit Suisse pumps Weir

8th Nov 2011 12:58

Despite falling 4.7% yesterday the oil and gas engineering firm Weir is getting a thumbs up from analysts at Credit Suisse, who continue to expect the stock to outperform the industrial engineering sector. Credit Suisse suggests the drop in price yesterday was a partly a reaction to the 40% increase in the company's share price over the last month, in addition to the board merely maintaining its profit guidance for the year. In other words, no big deal, and probably just a blip - a view which is backed up by the share price recovering 2% in morning trading today.With yesterday's temporary blip dealt with the CS argument is that Weir has provided "sector leading" organic growth with orders way ahead of expectations between July and September, emphasising Weir's growth potential.Credit Suisse also notes that demand for the well service pump and pressure flow control equipment made by Weir's SPM division is way ahead of supply and won't sate the market until the middle of next year at the earliest.Other plus points include a war chest of £550m for future acquisitions and an enterprise value versus sales ratio of 1.7. To top it all off, Credit Suisse believes earnings before interest, tax and amortisation (EBITA) margin for 2010 will be an impressive 18.5%. The brokers have moved the target price for Weir up from 1850p to 2050p.