There are days when the market feels like a Victorian weather vane, twitching at every change in the industrial breeze. Yesterday’s updates on Bodycote and Diploma offered a neat contrast: one business feeling the draught, the other happily catching an up-gust.
Bodycote Group (LSE:BOY) first. The heat-treatment specialist, which hardens and strengthens metal parts for everything from cars to jet engines, has seen a touch more warmth in trading after a tepid first half. Revenue from July to October rose 2.2% on an underlying basis, better than the 3.6% drop earlier in the year.
That is progress, although Deutsche Bank still trims its numbers for next year and nudges expected operating profit down to about £116 million, a 1% cut.
The sticking point is energy. Most of Bodycote’s end markets are heading in the right direction, but energy-related work is weaker and has prompted a downgrade to the outlook for Specialist Technologies, the higher-margin side of the group that handles more complex treatments. This is partially offset by steadier performance in its classical plant and heat-treatment operations, where underlying revenue rose 4%.
A defence contract due for delivery in the final quarter remains the swing factor for 2025. Looking further out, Deutsche Bank has adjusted its assumptions: aerospace and defence slightly higher, but industrial and automotive a touch softer, and central costs a bit heavier. That leaves its 2026 operating profit estimate down 3%.
Still, the shares’ flat response suggests investors have taken this in stride. At 604p, they trade on a December 2026 price-to-earnings multiple of about 12.6 times, below a long-run average north of 15. An 8% free cash flow yield also gives some insulation. The bank’s target price moves to 835p from 860p, a mechanical adjustment after the earnings tweaks rather than a change in view.
Diploma PLC (LSE:DPLM), meanwhile, continues to behave like the model pupil in the engineering supplies class. The group distributes specialist parts, including seals, controls and life sciences equipment, and has a habit of delivering growth that looks enviably straightforward.
Organic revenue rose 11% in the year, above the 10% guidance, helped by strong volumes. Strip out currency movements and it was 14%. Reported revenue reached £1.52 billion.
Operating margins widened to 22.5%, 160 basis points higher than last year and better than Deutsche Bank expected. That pushed operating profit up 20% to £342.7 million, about 3% ahead of the bank’s forecast. Adjusted earnings per share climbed 21% to 176p.
The result is an 8% uplift to earnings forecasts and a new 6000p target price, up from 5400p. With the shares closing at 5290p, the bank’s stance remains supportive.
Two industrial stories then: one navigating a trickier cycle, the other powering on. Not a bad snapshot of the wider market mood.