Broker snap: Nomura downgrades Wood Group to reduce

11th May 2012 10:21

Nomura has cut its rating on oil and gas services company Wood Group from neutral to reduce, saying that the stock's valuation is now demanding and its turbo-machinery services division GTS is at risk of disappointing."Wood Group (WG) gave a confident outlook for 2012 in its IMS and maintained guidance in line with consensus expectations. Renewed momentum in the Gulf of Mexico and strong activity in West Africa and Australia should fuel impressive engineering performance in its upstream division," the broker acknowledged in a research note this morning.However, analysts said that this "should be partly offset by weaker downstream activity in the US and our expectations of a more muted outlook in GTS in the absence of major EPC awards year-to-date."The stock has jumped 19% in 2012 so far, outperforming UK peers by 5%. Shares at trading at 14.3 times 2013 earnings, compared with the average sector multiple of 11. Given this, and the more bearish view on GTS, the broker downgrades to reduce.However, the target price is lifted from 680p to 720p.Shares were trading 2.0% lower at 760.5p by 10:50 on Friday morning.BC