Broker snap: Expect consensus downgrades for Spirax, says Jefferies

22nd Aug 2012 11:15

Jefferies has reiterated its 'hold' rating and 2,090p target price for steam trap and pump maker Spirax-Sarco after its interim results were 'somewhat disappointing'.The broker said in a research report on Wednesday morning: "We typically take a more pragmatic view than most on 'misses'; however Spirax's interim results are sharply lower than we had expected. As expected, Europe, LatAm and currency headwinds impacted the 1H12 results; however profitability was impacted by a number of additional 'issues'."Sales came in broadly in line with forecasts at £313.5m, but adjusted pre-tax profits of £59.3m came up 7% short of the broker's £64.0m. Earnings before interest and tax (EBIT) and EBIT margins of £59.0m and 18.8%, were also below forecasts of £63.4m and 20.1%, respectively.Furthermore, Jefferies said: "Although 2H12 appears to have started well and the company is cutting costs, we expect modest consensus downgrades and note the already premium rating."The broker expects to see consensus forecasts reduced by 3-4% on the back of these results."We maintain our positive long-term view on Spirax and a 'miss' does not always signal anything more sinister (Spirax remains a quality business). However, trading on 16x [2012 earnings] going into these results, the shares would be under considerable pressure today and we believe there is better value elsewhere in the sector."Investors seemed to agree today, with the stock down 5.83% at 1,940p by 11:13.BC