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JPMorgan reinstates coverage of Smiths Group at 'overweight'
1st Feb 2022 12:33
(Sharecast News) - JPMorgan Cazenove reinstated its 'overweight' rating on Smiths Group on Tuesday following a period of restriction.
The bank said the sale of the medical business and the appointment of a new chief executive combine to produce "the most significant" change at the company in more than a decade.
"As with all transformation stories, this one requires belief," JPM said. "However, at the current share price, we do not think investors need to believe much, and, as it stands, have the potential to benefit from significant upside."
JPM has a 1,900p price target on the shares, which it said could be worth around 2,950p in its blue sky scenario.
The bank noted that Smiths' November capital markets day included new financial targets, which outlined ambitions on performance way in excess of the company's history, but no 'big bang' in terms of structural or portfolio change.
"Instead, management sees many of the 'right' things in place, but the group requires a more pro-active, urgent and ambitious approach.
"Despite the absence of headline changes, we believe almost all areas of the business are seeing changes aimed at improving performance; in our view this programme of numerous incremental improvements may well prove more deliverable."
The bank said the sale of the medical business and the appointment of a new chief executive combine to produce "the most significant" change at the company in more than a decade.
"As with all transformation stories, this one requires belief," JPM said. "However, at the current share price, we do not think investors need to believe much, and, as it stands, have the potential to benefit from significant upside."
JPM has a 1,900p price target on the shares, which it said could be worth around 2,950p in its blue sky scenario.
The bank noted that Smiths' November capital markets day included new financial targets, which outlined ambitions on performance way in excess of the company's history, but no 'big bang' in terms of structural or portfolio change.
"Instead, management sees many of the 'right' things in place, but the group requires a more pro-active, urgent and ambitious approach.
"Despite the absence of headline changes, we believe almost all areas of the business are seeing changes aimed at improving performance; in our view this programme of numerous incremental improvements may well prove more deliverable."