Weir Group PLC (LON:WEIR) saw its shares jump higher this morning after the pumps manufacturer raised its full-year guidance as it flagged up an accelerated recovery in the Northern American oil and gas markets.
In a trading update, the FTSE 250-listed group said that, in recent weeks, upstream North American markets have recovered more strongly than formerly anticipated.
READ: Weir sees profits drop, although fourth quarter prospects improve in oil and gas sector
It noted higher levels of frack fleet utilisation and significant tightening of industry capacity are both benefiting the group's Oil & Gas division.
As a result, the group has seen increased volumes, stronger operating leverage and modest pricing recovery ahead of prior expectations, and has delivered low double-digit operating margins in the first half.
It added: “Assuming supportive market conditions continue, the division is now expected to deliver low-teens operating margins through the second half with full year revenues and operating profits that are above the upper end of analysts' estimates.”
In a note to clients, analysts at UBS said: “The company has upgraded guidance in O&G driven by better top-line and margins implying a c.80% upgrade to consensus adjusted EBITA at £46m.”
They added: "We expect this to be taken positively by the market, particularly given the recent uncertainty around the oil price.”
In early morning trading, Weir Group shares were up nearly 9%, or 163p at 1,987p.
Minerals division expectations remain unchanged
At group level, Weir said, the growth will be partially offset by one-off charges to operating profit of £13mln related to previously announced legacy contract delivery challenges in its Gabbioneta business, part of the Flow Control division. It added that expectations for the group’s Minerals division remain unchanged.
Weir concluded: “The updated outlook for the Group's full year performance is now for strong constant currency revenue and profit growth. As previously indicated, profits will be weighted to the second half of the year.”
The firm will publish its interim results on July 27.
-- Adds broker comment, share price --