Spirax Group PLC (LSE:SPX) delivered full-year profits around 2% ahead of expectations, but RBC has cut its earnings forecasts for the next three years anyway, citing weak volume trends in the company's core steam business and currency headwinds.
The broker kept its 'underperform' rating on the industrial equipment group while nudging its price target up to 6,800p from 6,000p, reflecting a move to a 2026 base year for its valuation.
The steam division, which still accounts for around half of group revenues, managed only 1% revenue growth in 2025.
Stripping out large projects in China and Korea, underlying volume trends pointed to a continuation of a decade-long pattern of anaemic growth, RBC reckons, forecasting just 2% growth in 2026, implying no meaningful volume recovery.
The brighter spots were in the group's other two divisions.
Electric Thermal Solutions delivered 11% organic growth in the second half, and the company reiterated a path to 20% margins by 2027, up from 16.2% last year.
Watson-Marlow fluid technology solutions, which RBC described as the highest quality asset in the portfolio, accelerated sharply in the second half as biopharma markets showed signs of life, with management flagging a return to 30%-plus margins in the medium term.
RBC trimmed its 2026 to 2028 earnings per share forecasts by 3% annually, reflecting both currency moves and lower structural growth assumptions for steam.
Analysts noted that management talked a lot about capital allocation, with a "clear focus" on improving returns on invested capital, which is 13% today with a target of >15% (and a past history of >20% peaks).
"However, they did note that they could be willing to go above the upper end of the target range for acquisitions, though commentary suggested that this is unlikely to be in ETS where the key focus remains on driving improved ROIC in the existing assets."
Shares in Spirax were little moved by the results on Tuesday and were down 0.7% at 7,260p on Wednesday afternoon.