Product testing giant Intertek PLC (LON:ITRK) received not one but two upgrades today from Jefferies, sending it to the top of the FTSE 100 risers.
Rather than a typical move from ‘sell’ to ‘hold’ the US broker has gone to straight to ‘buy’ with a 43% jump in its target price to 4,300p.
The abrupt about–turn is put down to the US broker now thinking profits will grow faster than revenues while strong free cash flow means it can confidently mergers & acquisitions can now be included in its forecasts.
Yesterday, for example, Intertek bolted on EWA-Canada, a cyber security firm focused on the internet of things and Jefferies expects more of the same.
“Cash generation is very strong with 75p of FCF [free cash flow] for every 100p of EPS and subsequently the balance sheet quickly de-levers.
“We expect the M&A process will be more rigorous with regards to value creation and in our view, a bolt-on approach to M&A has a better chance of value creation.”
Forecast earnings for next year have been raised by 10% of which 6% is underlying, while growth and margins in the main division - products - look well supported by secular drivers.
Shares jumped 4.5% to 3,700p.