Limited scope for outperformance at Smiths Group, says Credit Suisse

21st May 2015 11:16

Credit Suisse has cut its rating for Smiths Group to 'neutral' and lowered its target price from 1,270p to 1,250p, saying it sees limited upside.To coincide with the technology company's third-quarter trading update, the bank has reviewed its investment case and transferred coverage to a new analyst, who removed the previous 'outperform' recommendation."Although we continue to see value in Smiths Group, given the current management transition period and continuing end-market headwinds, we see limited scope for near-term outperformance," Credit Suisse said.Nevertheless, the bank said that the scope for "portfolio rationalisation" at Smiths Group is the stock's key attraction, given its current conglomerate structure and undemanding valuation."This would provide scope to neutralise the pension deficit issue (that has held back annual cash generation) and free up capital to reinvest in the core," it said.However, analysts pointed out that the current management changes - new CFO starting in September and CEO successor yet to be announced - mean that there is unlikely to be any decisions to realise this value in the near term.Smiths was trading 0.9% higher at 1,182p by 11:23.