Smiths Group has lower growth than peers, says UBS

21st Feb 2014 12:37

UBS has downgraded its rating for technology and engineering firm Smiths Group from 'neutral' to 'sell' and trimmed its target price from 1,450p to 1,340p, saying that it has lower growth potential than others in the sector."Smiths comes out in the bottom quartile on our sector quality analysis looking at historical performance. Going forward, a forecast three-year earnings per share compound annual growth rate of around 5% is also at the low end of the group," said analysts Mark Fielding and Robbie Capp."We do not see an often-hoped-for break-up as likely and the sum-of-the-parts valuation appears generous today, given the lower growth than peers."Fielding and Capp explained that while the company has "good businesses with strong market positions", it is held back by its conglomerate nature and the more challenging conditions that some of its subsidiaries have faced.At Smiths Group's first-half results on March 19th, the analysts expect the company to provide more detail around its restructuring plans and new divisional targets, though these are not likely to be a major catalyst for the stock."While these could be a minor positive, the already announced new targets for the John Crane business were not dramatically different from current levels/our forecast, and we do not see major upside to expectations for the group overall."The stock was down 2.16% at 1,360p by 12:30 on Friday.BC