Rolls–Royce’s profit warning and BAE Systems job cuts, both announced yesterday, have put a big cat among the pigeons in the engineering space.
Rolls (LON:RR.), predictably, gets a bashing. JP Morgan is typical, slashing its price target to 405p and re-iterating there are still major questions over its business model.
BAE Systems (LON:BA.) fares a little bit better, with JPM upgrading to hold now that the bad news is out of the way.
UBS kept its buy rating saying the news has elIMInated markets' concerns regarding the negative implications of a potential slowdown in production of the Eurofighter.
Other engineers also get lots of coverage.
IMI (LON:IMI) is cut to ‘hold’ from ‘buy’ at Societe Generale with a new target price of 975p.
Global industrial demand is set for another leg-down, suggests the broker, so there is little scope for upside surprise over the next 12 months.
Opinions are divided over the fate of pump maker Weir (LON:WEIR).
Liberum is a seller with a 25% cut in its target price to 1,000p, saying that consensus earnings are still 15% too high.
“The market is underestimating the impact of rising Minerals aftermarket pressure on margins.”
On the reverse, Deutsche Bank has renewed coverage with a ‘buy’ note.
“Weir’s current profit centre is the minerals aftermarket segment; a business that has both stable and high margins.
“Weir has remained cashflow positive even through the crisis; this isn’t your typical leveraged shale player.
Given the recent run down in price/estimates, we think the market and consensus underestimate its resilience, concludes the broker.
Away from metal bashing, Liberum has put forward the firmer FT Pearson (LON:PSON) as its top sell idea.
“There is a high risk that Pearson misses their revised 2015E guidance and medium-term consensus estimates need to come down as structural pressures increase.
“Our strategy team has also flagged Pearson as having several “red flags”, which is a concern.”
Troubled security firm G4S (LON:GFS) was also under pressure as RBC cut its target price and repeated its "underperform" rating.
LIberum noted the decision by ICL to stop potash production at its Boulby mine in Cleveland and switch to polyhalite, which is says is a major endorsement of the project being undertaken next door by Sirius Minerals (LON:SXX).
ICL expects the decision will double the mine’s earnings but the potential for Sirius is in theory much greater says the broker.
Results from Sirius’s feasibility study are due in December. Buy says Liberum.
WH Ireland said AdEPT Telecom’s (LON:ADT) interim results, released earlier this week, were “solidly” and “robustly” ahead of its forecasts, topped off with a better-than expected interim dividend hike.
The broker reiterated its ‘buy’ recommendation, and lifted its target price up by 17%, or 45p, to 305p.