Citigroup downgrades Premier Farnell, notes structural challenges

24th Sep 2015 12:32

(ShareCast News) - Premier Farnell was under pressure after Citigroup downgraded the stock to 'sell' from 'neutral' and cut its price target to 90p from 140p following the company's profit warning last week.The bank said it was downgrading its full-year 2016 earnings before interest and amortisation estimate to £74m, in line with management guidance, which implies a 20% contraction in second-half EBITA year-on-year."With 2015E and 2016E EBITA well below levels achieved in the late nineties and early 2000s, Premier seems structurally challenged, which should weigh on its valuation," it said.Citi said that given uncertainty over its ability to deliver sales growth and operating leverage, earnings risk remains on the downside as management struggles to offset ongoing gross margin erosion.The bank cut its 2016 diluted earnings per share estimate to 11.5p from 12.8p and its 2017 estimate to 12.5p from 13.7p.At 1240 BST, Premier Farnell shares were down 5.5% at 102.25p.