RS Group PLC (LSE:RS1) shares fell sharply on Friday after investment bank UBS slashed forecasts, cuts its price target and downgraded the stock to 'neutral' from 'buy'.
“With recent data suggesting weakening markets and reversing share gains, we now expect a bigger profit 'unwind' for RS Group,” the Swiss bank said.
The broker foresees a period of sustained negative organic growth and margin pressure ahead and has cut estimates “significantly”, placing it around 14-19% below consensus.
While much of the risk is now reflected in the share price, which is 35% lower than mid-2022 highs, UBS sees limited re-rating potential for now given the negative earnings outlook.
The bank set a new price target of 800p, down from 1,250p, still well above the current share price, which fell 3.8% to 694.60p in London on Friday.
Earnings per share forecasts have been slashed by 13-22% for the next three financial years, driven by lowered organic growth and gross margin forecasts.