Morgan Stanley pulled the plug on temporary power provider Aggreko PLC (LON:AGK) today, downgrading its rating to ‘underweight’ from ‘equal-weight’ on worries over changes to its utility market business.
In reaction, the FTSE 250-listed firm’s shares shed 3.5%, or 31.0p at 845.5p.
In a note to clients, the US bank’s analysts said: “We view Aggreko as a challenged business with a strong management team.”
READ: Aggreko's 2016 profits drop, warns 2017 results will be even lower
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They added: “2017-18e should see a recovery in its Local rental businesses (N. Am O&G, 299MW in Eurasia, the PyeongChang Winter Olympics in 2018 and cost savings).
“However, its core issue of not winning enough Utility contracts to offset churn, while pricing remains under pressure, should lead the equity story from here.”
They said: “In addition, its new fleet strategy has yet to show any real signs of paying off.
“These trends reflect further signs that its Utility market is changing.”