Proactive Investors - Run By Investors For Investors

Weir Group rallies as Barclays upgrades rating to ‘overweight’ and lifts target price

Barclays sees an attractive entry point in Weir as shares in the oil and gas engineer have fallen 7% since reporting a decline in full year profits
Weir to benefit from rising capital expenditure and strong cash flows in mining sector

Weir Group plc’s (LON:WEIR) shares have received a boost today after Barclays raised its rating on the stock to ‘overweight’ from ‘equal weight’ and lifted the target price to 2,300p from 1,900p.

In a note to investors on the wider European mining equipment sector, Barclays said an attractive entry point has emerged in Weir as its shares have fallen 7% since it reported its full year results on 24 February.

The bank said mining capital expenditure is set to recover in 2017 after a four-year downturn, up 19% for the 20 global miners it covers. It compares to a 34% drop last year and a 21% decline across 2012 to 2016.

“Miners are now generating strong cash flows, deleveraging balance sheets rapidly and – as is now clear from their 2017 budgets – stepping up capital spending again,” Barclays said.

Weir, which supplies engineering services to the mining and oil and gas sectors, stands to gain from this trend. 

“We see the investment case gradually shifting to minerals with a mining capital expenditure pickup supporting our 32% earnings per share compound annual growth rate from 2016 to 2019," Barclays said.

Last month Weir reported pre-tax profits fell 47% to £220mln in the year to January 1 as it took a hit from lower oil prices and forecast a further decline in earnings in 2016.

Chief executive Keith Cochrane said 2016 would be another tough year and it was planning for a further fall in constant currency group operating profits, driven mainly by lower activity levels in upstream oil and gas markets.

However, he said the group saved £110mln in 2015 and was planning another £40mln of cuts this year.

Shares rose 3.04% to 1,932p at the midday mark. 

Register here to be notified of future WEIR Company articles
View full WEIR profile View Profile

Weir Group Timeline

Related Articles

The Hayward Tyler Centre of Excellence in Luton
February 20 2017
The strong order book and pipeline should result in a stronger out turn for 2018, according to finnCap

© Proactive Investors 2017

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use