JP Morgan downgrades Elementis to 'neutral' after profit warning

25th Jun 2015 10:12

JPMorgan Cazenove downgraded Elementis to 'neutral' from 'overweight' and cut the price target to 275p from 313p following the company's profit warning on Wednesday.JPM said the downgrade reflected the likelihood of a period of relative weakness as the market awaits signs of a more stable trading environment.It seems the three end market pressures cited by Elementis - oil, China and Latin America - may be cyclical more than structural, said JPM."While this is of little comfort to investors who had become inured to consistent growth from the restructured Elementis, it suggests that the scope for a trading recovery remains further down the line," the broker said.On that basis, the size of the earnings downgrades and the consequent share price reaction, both down around 15%, may not be a harbinger of further declines, but should provide a base for a recovery of sorts in the next twelve months, JPM remarked.The bank cut its 2015 adjusted earnings per share estimate to $0.22 from $0.25 and its 2016 forecast to $0.23 from $0.27.At 10:31, Elementis shares were down 1% at 255p.