Smiths Group PLC’s (LON:SMIN) annual profits and revenues were slightly below our expectations, J.P. Morgan Cazenove said as it downgraded the stock.
The engineering company reported a 2% decline in reported revenue to £3.2bn in the year to July 31, while operating profit decreased to £533mln from £589mln last year, largely due to foreign exchange headwinds.
J.P. Morgan cut its rating on the stock to ‘neutral’ from ‘overweight’, saying it sees "limited upside" to its price target of 1,660p.
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The broker noted that an improvement in the second half returned Smiths to underlying revenue growth of 2% for the full year.
"As expected there was a sharp bounce in organic growth in the Detection division and the pace of organic growth accelerated in most other divisions," J.P. Morgan said.
During the period, Smiths acquired Morpho Detection, a supplier of chemical, radiological, and nuclear detection systems, filtration products firm Seebach and the heating element division of Osram.
"The integration of Morpho has progressed smoothly resulting in the cost savings being delivered more swiftly than anticipated," J.P. Morgan said.
It added: "We expect 2019 to be a year of steady progress in the operating performance of the group."
In mid-morning trading, shares in Smiths were down 0.9% to 1,506p.