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.