Hays is standout loser on FTSE 100 after RBC downgrade

28th Jul 2015 10:40

(ShareCast News) - Hays was the standout loser on the FTSE 100 after RBC Capital Markets cut the stock to 'underperform' from 'sector perform', retaining its 160p price target."We simply think that the stock has performed remarkably well, despite the fact that we believe consensus forecasts are high considering forex and some uncertainties regarding specific end markets," said the Canadian bank.It noted that the stock has outperformed the FTSE All Share by 16% year to date and now traders at 18x 2016 earnings estimates, yielding only 2.3%. RBC added that Hays has the slowest growth of the UK staffers in net fee terms.The bank said it has slightly downgraded its forecasts once again and now stands around 5% below consensus for fiscal 2016."This is despite giving some benefit of the doubt for conversion rates to continue to move north, and EBITA growth to be around 2x net fee growth (which could be remarkable at a point where headcount investment into underlying growth may need to accelerate)."It said that while Hays' UK operations have clearly improved with the economy and are tracking back to a much more significant profit contribution, it has concerns over the company's reliance on Australia and Germany as profit drivers.It said that historically, currency has been a key tailwind, particularly the Australian dollar, but this has reversed materially of late. The euro has also now become a headwind, it added.At 0949 BST, Hays shares were down 1.4% at 165p.