Spirax-Sarco Engineering PLC (LON:SPX) has been downgraded to ‘hold’ from ‘add’ by analysts at Peel Hunt, who said the company was “proving its resilience during the [coronavirus] crisis” but the company’s outlook was now reflected in the share price.
In a note on Friday in which it also retained its target price of 8,500p on the FTSE 100 firm, Peel Hunt said the outlook was “increasingly uncertain” despite Spirax’s business sector being less affected by the pandemic, however, they said without a second outbreak the sales decline in the second half of the year will be lower than the first thanks to an expected improvement in the fourth quarter.
READ: Spirax-Sarco confirms dividend after robust first quarter, expects worse to come
The broker also highlighted that trading had “held up well” with all of the firm’s production facilities up and running and over 50% of sales directed to “critical sectors on the frontline of the pandemic” including hospitals, pharmaceuticals, food & beverage, power generation and water treatment.
Peel Hunt added that with headroom of £500mln and a “robust” balance sheet, Spirax was “in a minority of industrials stocks that is still paying a dividend”.
The company’s plans to pay a dividend were confirmed in a trading statement at its AGM on 13 May, when Spirax also reported that organic sales had fallen 5% in the first four months of the year alongside a profit decline, although this has been limited by cost savings which had lifted profit margins.
“The AGM statement confirmed SPX’s resilience, which in our view justifies the premium rating. However, we believe this is now reflected in the share price”, Peel Hunt concluded.
Spirax shares were down 1.9% at 9,802p in mid-morning trading.