Broker snap: Reasons to be optimistic at Fenner, says Jefferies

13th Nov 2013 16:08

Shares in polymer manufacturer Fenner raced ahead on Wednesday after the company unveiled better-than-expected annual results, with Jefferies providing a boost after maintaining its positive view on the stock.The broker said that there are "reasons to be optimistic in some areas" despite the challenges that lay ahead for the firm, with management still expecting year-on-year growth overall. With forecasts unlikely to change post-results and the stock having an "undemanding valuation", Jefferies reiterated its 'buy' rating for the shares with a 430p target price.Fenner, which makes industrial belting products, said that pre-tax profits fell to £67.9m during the 12 months ended August 31st from £88.6m a year earlier, while the earnings before interest and tax (EBIT) margin slipped to 12.4% from 14.3%. Revenue slipped to £820.6m during the year from £830.6m previously."These declines have long been flagged and pleasingly these results are slightly ahead of our expectations and involved a decent 2H13 recovery," Jefferies said.Meanwhile, the broker said that the outlook statement alongside the results was also "robust", with improving trends noted in the Engineered Conveyor Solutions division and growing optimism in Advanced Engineered Products."In spite of a meaningful FX headwind (assuming current rates hold), management's FY14 guidance is unchanged - this is robust and will be better than some will have feared - and hence we do not expect much change to consensus forecasts."The stock was trading 10.8% higher at 451.3p before the close on Wednesday, up 44p on the day and well ahead of Jefferies' target price.BC