Broker snap: Investec hikes Smiths Group target after results impress

18th Sep 2013 10:15

Shares in technology firm Smiths Group were making gains on Wednesday morning as the company impressed with its annual results, with Investec providing a boost after raising its target price for the stock.The broker said that the results were slightly better than it had expected with the 20 basis-point fall in operating margins only half the decline it had anticipated.Analysts Michael Blogg and Chris Dyett said: "The negatives have been well flagged and action is being taken in every division to raise returns, helping to pay for new products and shift further away from dependence on government spending. The group already generates good margins and it is pushing to raise them further."Net debt of £744m by the year-end (July 31st) was £35m lower than expected and pension liabilities also fell. Meanwhile, the full-year dividend was shy of forecasts, but the firm impressed with its 30p special dividend as it returns £118m to shareholders.Investec raised its target price for Smiths from 1,500p to 1,590p and maintained its 'buy' rating, saying that its current valuation "fails to reflect the quality of the group"."We believe that the group is fundamentally undervalued and today's statement might begin to wake up investors to the potential, even without major disposals."Smiths Group's activities are focused on threat & contraband detection, medical devices, energy, communications and engineered components markets.The stock was up 3.29% at 1,421.32p by 10:29 on Wednesday.BC