Numis downgrades Weir after recent re-rating

1st May 2014 10:39

Numis Securities has downgraded its rating for Weir Group from 'add' to 'hold' despite the company's in-line first-quarter trading update on Thursday, saying that it sees little upside after the stock's recent strong run.The broker said that the stock now trades at 18.1 times estimated earnings for 2014, falling to a multiple of 16.9 on 2015 forecasts.Following a 26% surge since the start of the year, Numis says that Weir's shares have now re-rated to fair value. It maintained its 2,700p target price for the stock.Nevertheless, despite the downgrade the broker said: "Its acquisition cushion, aftermarket profile and clear long-term growth opportunities should provide valuation support at these levels. Additionally, the balance sheet still provides scope for yet further acquisitions."The company said trading in the last four months has been in line with expectations, helped by a strong performance in the oil and gas and power and industrial divisions, as it sticks to its full-year targets.The FTSE-100 group expects good constant currency revenue and profit growth with margins broadly in line with 2013 levels, however reported results will be hurt by adverse foreign currency movements.Numis said: "We continue to view Weir as a high quality business with leading market positions, excellent margins and strong cash generation."The stock was 3.3% lower at 2,602p by 10:37.BC