Smiths Group gains as JPMorgan reiterates 'overweight' stance

2nd Jul 2015 09:55

Share in Smiths Group rose nearly 3% on Thursday after JPMorgan Cazenove reiterated its 'overweight' stance on the stock, pointing to close to 13% upside to its unchanged 1,280p price target"We believe the group is currently on track to deliver on our unchanged full year forecasts for 2015," the broker explained.JPM said the key challenge for the new management team is how to improve the revenue growth of the group. This can be best achieved through a mix of internal investment - in research and development and sales and marketing - and re-shaping the business portfolio, the analysts said.The US broker expects the new management to undertake a strategic review. The group is likely to remain an industrial conglomerate, albeit with increased focus on businesses/market segments where Smiths can generate faster than global GDP growth and premium returns, said JPM."To deliver the growth and margins we expect the new management team to invest internally and supplement this with acquisitions," JP Morgan remarked.It added the stock is trading at a substantial discount to the sector in terms of PE and EV/EBITDA multiple despite the prospect of delivering an operating profit margin 500 basis points above the average for the sector.