Broker snap: Investec undeterred by Smiths Group profit warning

17th Jul 2013 10:23

Investec has reiterated its 'buy' rating and 1,500p target price for Smiths Group despite the technology firm surprising the market with a profit warning on Wednesday, with the broker saying that its positive outlook on the stock remains unchanged.Smiths said in a pre-close update that headline operating profits for the year to July 31st would be up to £15m below current market forecasts due to contractual issues in its Detection unit.Analyst Michael Blogg said: "Contract cost overruns are never good news - apart from the direct financial impact, they call into question a company's systems and conservatism - but the £15m hit for Smiths Detection looks like a one-off in a business that is now on an improving trend."Investec's previous forecast was for £77.5m of operating profit at Detection and £564m for the wider group. The £15m impact is equal to a 2.7% of group profits."Although this update is negative, it does not fundamentally change our view that this is a group containing high-quality operations, most of which are performing well against mixed market conditions," Blogg said.The stock was down 3.16% at 1,347p by 10:56 on Wednesday.