Broker snap: Wood Group deserves to trade at a premium, says Credit Suisse

21st Aug 2012 10:42

Credit Suisse has reiterated its 'outperform' rating and 925p target price for Wood Group, saying that the oil and gas services firm outdid its UK peers with its first-half results."Unlike UK peers we believe Wood Group's 1H results and outlook are solid," Credit Suisse said."The outlook statement is positive, highlighting continued good growth and that uncertainty and lower commodity prices have 'not had any discernible impact on activity levels or the current outlook'."The broker highlighted Engineering and Gas Turbines as the key positive areas of the results with EBITA for each division up 44% and 69%, respectively.Nevertheless, the broker notes that there are still remains two areas of concern: the large Omani contract which continues to generate losses; and issues surrounding new orders for the Power Solutions business."At our target the stock would trade at 15.0x [2013 earnings], a premium to the sector, which we believe is justified given the better balance sheet than history and strong organic growth," Credit Suisse said.Nevertheless, shares were down 1.29% at 724.72p by 10:38.BC