A downgrade to ‘sell’ pulled shares in Aggreko PLC (LON:AGK) over 5.5% lower in morning trade today.
The German investment bank Berenberg believes investors are getting carried away about the prospects for the temporary-generators specialist.
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It pointed out the stock has ticked up 12% since mid-August, with speculators betting the company could benefit from the “recovery and rebuild effort” following the recent hurricanes that hit the south-east corner of the US.
“This re-rating is unjustified, in our view, and we think any cyclical recovery in the group’s North America business will be temporary and offset by disappointment elsewhere,” Berenberg said in a note to clients.
It reckons the current consensus earnings expectations are “unrealistic” as they factor in 25% growth for the company’s utility arm.
Aggreko will “struggle to stand still”
The bank believes Aggreko will “struggle to stand still” following a slowdown in order intake and an intensification of competition. Foreign exchange rate “headwinds” could further compound the misery.
It cut its earnings per share forecasts by 10% and 8% respectively for the next two years, while downgrading its recommendation to ‘sell’ from ‘hold’.
Berenberg said the shares, currently changing hands for 887p each, are worth just 770p.
In mid-morning trading, Aggreko shares were 5.6%, or 62.5p lower at 886.5p.