Capita hit by Credit Suisse downgrade, stock "up with events"

1st Aug 2014 12:16

Credit Suisse has downgraded its rating for outsourcing group Capita from 'outperform' to 'neutral', saying that the stock is "up with events" after its recent interim results.Capita's 11% organic growth reported for the first half was strong and was well-received by the market, the bank said, but not as good as it had expected."We had estimated even better organic growth for the first half and 2014 in the belief that the transactional/spot businesses were growing at high-teen rates," Credit Suisse said.The bank has now trimmed its earnings estimates for the company slightly, saying it now assumes organic growth to be just 8.4% this year, down from its previous forecast of 10.2%.As such, the target price for the shares has been cut from 1,250p to 1,215p, which suggest only "limited upside near-tern potential".The bank said that Capita's 20% outperformance over the FTSE 100 since the start of the year means that the stock's valuation is now at the top-end of the support services sector."Though positive [earnings] momentum is likely to be supported by further bolt-on acquisitions, we believe uncertainty around the potential impact of a Labour election victory (which could be perceived as negative for the outsourcers) could cap the rating from here."The stock was down 3.6% at 1,159p by 12:24.BC