Broker snap: Goldman downgrades SIG's earnings

7th Apr 2010 12:30

Goldman Sachs has retained its 'buy' recommendation but downgraded its earnings estimates for SIG after the construction products provider's recent results, which were in line with expectations.The company got off to a slow start to 2010, partly as a result of adverse weather conditions in the UK and continental Europe, and that has prompted Goldman Sachs to modify its sales and profit projections. "We now forecast 2010 and 2011 revenue growth of -2% and +8% (from +5% and +8%). As a result, we reduce our 2010 and 2011 underlying PBT [profit before tax] to £67m and £103m (from £95m and £140m),' Goldman Sachs analyst Karen Hooi said.The broker remains a buyer of the stock, despite the low visibility on the timing and size of a recovery in the construction sector, on the basis that "SIG is a survivor within the industry since it occupies a niche position as a specialist distributor."Hooi believes continued operating cost and gross margin control is vital to SIG's profit recovery. "We also believe SIG's financial position remains relatively solid and expect the company to remain within its debt covenants," Hooi said. The company's six month price target remains unchanged at 160p.