Bodycote PLC (LON:BOY) and IMI PLC (LON:IMI) have been upgraded by Liberum as the broker stress-tested London’s industrial stocks to see which ones will hold up best in the case of a “2009-style earnings contraction”.
For Bodycote, which Liberum upgraded to ‘buy’ from ‘hold’ and upped its price target to 760p from 700p, the broker said the coatings specialist could “comfortably withstand a 2009-type earnings decline of 90%” and that it was currently “one of the most oversold stocks” in its coverage.
“We believe Bodycote is a higher quality business than it was back then [in 20019], with greater earnings resilience”, Liberum said, adding that while they did not currently know the financial impact on the company, the firm had “plenty of financial headroom”.
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Meanwhile, Liberum upgraded engineer IMI to ‘hold’ from ‘sell’ and kept its price target at 850p, saying that while the coronavirus and weak oil prices presented headwinds for the firm, its balance sheet remained “robust” and their estimates were now “broadly in line with consensus”.
The most negative assessment from the broker was for Weir Group PLC (LON:WEIR), which was maintained at ‘hold’ and had its price target cut to 770p from 1,450p.
“With the weakest balance sheet in our coverage, Weir is our least preferred [capital goods] stock”, Liberum said, adding that the company’s leverage could reach debt covenant levels if there were “material mining production cuts”.
Shares in Bodycote were 2.2% lower at 528.1p in late-morning trading on Monday, while IMI dipped 0.6% to 719.8p and Weir sank 8.1% to 638.8p.