Investec, Numis divided on Smiths Group after first-half results

19th Mar 2014 11:19

Investec has maintained its positive 'buy' stance on Smiths Group despite the sharp fall in the manufacturing firm's share price on Wednesday after its first-half results.Numis Securities, however, chose to keep a 'reduce' rating, saying it sees "better value elsewhere" in the sector.Investec said that the company's first half was broadly in line with forecasts with pre-tax profit for continuing operations excluding certain items falling by 4% to £215m. Group revenues fell by 2% on a reported basis to £1,442m.Smiths Group said that judging by current exchange rates, currency movements will have a 4-5% impact on earnings for the full year, compared with only a marginal impact in the first half.Investec said: "As usual, fluctuations in the component parts that make up Smiths have been smoothed out at the group level, making a fairly dull story. The outlook for the second half looks better, if patchy, but the currency headwind is strengthening, which is already reflected in estimates."It added: "Until discount rates rise and allow the group to sell the Medical operations (which are struggling at the moment), we do not expect much drama. Nevertheless, the group is probably still undervalued on a sum-of-the-parts basis and we remain positive."Numis admitted that the stock is not expensive compared with other peers in the sector, but remained cautious.It said that Smiths Group's new medium-term targets "do not appear particularly stretched" but also suggested that there is little appetite by management to break the company up. "Hence we see better value elsewhere in more focused businesses (e.g. Rotork) or more actively managed portfolios (e.g. Melrose)."The stock was down 5.9% at 1,271p by 11:27.BC