Essentra PLC (LON:ESNT) extended recent falls as Citigroup downgraded its rating for the stock after the cigarette filters and plastic components manufacturer issued another profit warning yesterday.
In mid morning trading, Essentra shares were down another 2.8%, or 12.0p to 421.8p, having dropped sharply yesterday after it warned that its 2016 operating profit will be "modestly below" the lower end of its previous guidance.
In a year-end trading update, the FTSE 250-listed firm had noted that its Health & Personal Care Packaging unit saw a significant decline in revenue and profitability in the last two months of 2016.
READ: Essentra profit warning …
In a note to clients today, Citigroup downgraded its stance on Essentra to ‘neutral’ from ‘buy’ and cut its target price for the stock to 430p from 500p, as it lowered its earnings per share forecast for this year by 4% and reduced the next two years’ estimates by over 20%.
The US bank’s analysts said: “The trading update also revealed ongoing challenges in the H&PC Packaging division, which Essentra’s new CEO is indicating will take time to resolve..”
They added: “We anticipate the shares will be range bound over much of the next 12 months. Value attributes are being balanced by a lack of positive earnings catalysts.”
The analysts said they expect to “gain additional clarity from the next update of the strategic review on 28 July”
Meanwhile, Deutsche Bank retained its ‘hold’ rating on Essentra as it cut its underlying earnings forecasts by 6% for this year and by 22% for next.
In a note to clients, the German bank’s analysts said: “We believe an end of earnings cuts might now be in sight, but the stock re-rated with the profit warning and we believe optimism over medium-term performance is already largely priced in.”