Broker snap: Numis cuts Fenner forecasts on FX headwinds

15th Jan 2014 10:58

Numis Securities has kept its 'add' rating and 475p target price for Fenner but has reduced its forecasts for the industrial polymer products company due to currency headwinds.The broker said that underlying trading during Fenner's first quarter has been in line with is expectations with the Engineered Conveyor Solutions (ECS) performance down year-on-year as expected due to strong comparatives.Meanwhile, in the Advanced Engineered Products (AEP) division, Numis said that activity levels were strong and the company's comments on trading reflect "generally improving economic conditions".However, Fenner warned of the recent strength in sterling, saying that underlying profits for the year ended August 31st 2013 would have been £9m lower if using foreign exchange rates at the end of December.Numis said: "This represents a 7% downgrade to earnings forecasts. We therefore now estimate FY'14 profit before tax (PBT) of £85m and earnings per share (EPS) of 29.7p. We downgrade FY'15 by 5% to give PBT of £96.5m and EPS of 34.0p."Nevertheless, the broker said it remains positive on the group's long-term prospects: "We believe that the shares have potential to re-rate later in the year as further evidence of a return to normal mining replacement cycles emerge."As for Wednesday, the stock was 3.16% lower at 440.83p by 11:11.Liberum was also weighing on the share price after lowering its recommendation from 'buy' to 'hold'.BC