Investec cuts forecasts for Weir as lower commodity prices bite

3rd Dec 2014 10:35

Investec has slashed its target for the share price of industrial engineering group Weir by 17%, saying that almost every important data point for the company is "trending negatively".The broker reiterated its 'sell' recommendation to clients, as it cut its target price for the stock from 1,900p to 1,585p.Investec said it was making the "pre-emptive" move to lower its earnings per share forecasts for 2015 and 2016 by 16% and 21%, respectively, predicting consensus downgrades ahead of Weir's annual results next March."We think it is unlikely the company will comment until its preliminary results in March. However, by then we suspect that current trends in the group's key end markets will be impacting the trading performance and outlook," said analysts Thomas Rands and Chris Dyett.Weir provides a a range of engineering services and equipment to customers in the minerals, oil and gas, and power and industrial markets.Investec estimates that falling commodity prices - oil, gas and iron ore - will have a big impact on volumes for Weir."Headwinds are multiple (and growing)," Rands and Dyett said."Weir's share price has already been severely impacted as investor sentiment has turned, down circa 12% in the last week, but in our opinion it is too early to turn positive as both minerals and oil and gas are likely to be impacted by lower volumes and pricing pressure despite the aftermarket bias (which we also believe to be vulnerable)."The stock was 0.9% lower at 1,810.5p by 11:20 on Wednesday.