Smiths Group rallies on Citigroup upgrade

21st Oct 2015 09:44

(ShareCast News) - Smiths Group got a boost after Citigroup raised the stock to 'buy' from 'neutral' and lifted the price target to 1,200p from 1,050p to reflect an improved pension position and stability in the medical and detection businesses.The bank said it sees several areas of upside optionality at Smiths which the market is not pricing appropriately.Citi said a new chief executive offers a fresh perspective to address Smiths' corporate strategy, reassess medium-term targets in light of low global industrial growth and develop options to realise value."Portfolio action and self-help, through further cost and working capital rationalisation, provide opportunity, with support from recent (and ongoing) investment and research and development."In addition, it noted that the pension position has markedly improved versus recent years, providing additional strategic optionality or least lower barriers to portfolio change.The bank also pointed to operational improvement in terms of margins, selling, general and administrative expenses, working capital and return on capital employed.At 0950 BST, Smiths shares were up 2% at 1,010p.