LONDON (SHARECAST) - Following Thursday’s revelation by Renishaw that first quarter revenue growth was below expectations, three brokers have reviewed their forecasts for the precision tools maker, cutting their respective target prices by a significant amount.
Renishaw’s shares finished down 16% yesterday (from 1,028p to 862p) after the firm said that revenues rose by just 15% in the first quarter to £70.5m, compared with £61.3m the year before. Profit before tax for the first quarter fell from £15.1m to £13.6m.
"Due to current uncertainties surrounding the global economy, the board is closely monitoring the group's costs and future recruitment strategy. Despite near-term challenges caused by the economic environment, we remain focused on positioning the group for further long-term growth,” the statement said.
While Europe and the Americas achieved strong sales growth, revenues in the Far East - which the group said was an area of significant growth last year - were flat. Renishaw also admitted that it has seen a slowdown in one of its product lines sold to the electronics industries.
finnCap has downgraded the stock from hold to buy on Friday and cut the target price by 47% from 1775p to 940p after downgrading its current-year forecasts by 22%.
“Given lack of forward visibility and profit sensitivity we feel the shares are likely to track sideways for a while,” said analyst David Buxton.
UBS has kept its neutral rating but slashed its target by 33% from 1,350p to 900p.
“Stock trades on 10 times [historic] earnings which is 40% below the average multiple. There may be a buying opportunity later but for now the risks appear too great,” the Swiss broker said.
Meanwhile, Singer Capital Markets has maintained its fair value rating but reduced its target by the same amount (from 1,350p to 900p).
“This reflects not only the cut in estimates, but valuation using a lower multiple to reflect continued forecast uncertainty,” said analyst Jo Reedman.
By 14:04, shares were trading up 4.23% at 898.5p, recovering after the previous day’s sell-off.
BC
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