Broker snap: Jefferies downgrades IMI ahead of 'mixed' results

20th Aug 2012 09:52

Jefferies has downgraded its rating for engineering giant IMI from 'buy' to 'hold' ahead of the group's first-half results on Thursday."IMI reports its interims on the 23rd August and we expect a mixed/solid set of results, with slowing growth and some caution in the outlook," the broker said in a research report on Monday."Ahead of these results, we lower FY12F & FY13F earnings per share (EPS) by 4% and 2% (cutting underlying assumptions and updating for currency) and fear that consensus is too high still. The market may be favouring the cyclicals for now, but we prefer to revisit lower down."While Jefferies doesn't expect any surprises in the first-half figures, it believes there will be some "raised eyebrows" towards margins in the Severe Service division "which won't be particularly pretty". Meanwhile, growth rates in Fluid Power will have slowed in the second quarter, in line with the rest of the sector and the wider economy, the broker said."Cyclical stocks are currently in favour given talk of global policy responses and slightly better-than-expected economic data, however in respect of IMI, we take a more cautious stance ahead of what we believe will be a slightly mixed set of interims and given some near-term consensus forecast risk (our more positive longer-term view remains unchanged)."Jefferies has reduced its target price on the stock from 1,150p to 995p.BC