Broker snap: Jefferies downgrades Weir to 'hold'

2nd Nov 2012 09:23

Jefferies has downgraded its rating for engineering giant Weir from 'buy' to 'hold' ahead of its third-quarter results next week, saying that its short-term stance is one of 'rising caution' over risks to 2012 and 2013 consensus forecasts."We have not turned hugely bearish on Weir (more that we are cautious over the near-term) and we continue to like the business over the long-term," the broker said."There is, however, insufficient upside to our target price (1900p) to warrant a more positive recommendation." The previous target was 2,185p.Jefferies says that the focus of the trading update on November 5th will be the outlook and comments for Minerals order input and Weir SPM'ss margin durance next year. The broker said: "The market's concerns over the outlook for SPM have been well flagged, however we believe that the group's 2H12 performance may lag previous expectations (be it on sales or margin, or both) and although SPM is more than a Pumps/Fluid Ends business, we believe that consensus forecasts for both FY12 and FY13 appear too optimistic, although we sense growing signs of optimism about FY14."The outlook for mining capex has also deteriorated recently, although given the late-cycle nature of the division, this is unlikely to impact forecasts until FY14 (possibly 2H13), we believe."Jefferies says that the shares are trading on 13 times 2013 earnings based on its below consensus estimate. This valuation is in line with peers.In mid-morning trade on Friday, shares were down 2.19% at 1,754.79p.BC