Investec revisits estimates for Morgan Advanced Materials

The deeper-than-expected global slowdown forced analysts at Investec to revisit their forecasts for Morgan Advanced Materials, but they reiterated their underlying upbeat view on the company’s prospects.

Despite the advanced materials manufacturer’s considerable diversification, both geographically and by end-market sectors, weakening confidence in North America – a major trading region - was affecting a broad range of its markets, analyst Michael Blogg said in a research note sent to clients.

Notwithstanding that de-stocking might lie behind the weakness in markets such as consumables for the rail industry or auto components, “further adjustments are needed,” he said.

Momentum for its businesses in North America had deteriorated since the first half of 2015, China continued to be grim and Europe may be fractionally softer – although it was still not bad – Blogg said.

The analyst said he expected consensus estimates for operating earnings on an EBITA basis to be lowered by between 5-10% as a result of the firm’s cost reduction measures.

His own estimate had for EBITA of £119.7m (consensus: £110.0m-£121.5m).

However, he added that: “we believe that he will have found enough good-quality technologies, products and operations in the portfolio to be the basis for future progress.”

The analyst placed his target price ‘under review’ but stuck by his recommendation to ‘buy’.