Broker snap: Mixed outlook for Smiths

Related Quotes

Symbol	Price	Change
SMIN.L	1,065.00	-3.00

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LONDON (ShareCast) - There were encouraging aspects to the recent quarterly trading update from Smiths Group (LSE: SMIN.L - news) but after the shares have risen by more than a fifth over the last three months, broker Charles Stanley rates the shares no more than a 'hold'.

'We like SMIN's [Smith Group's] recurring revenue streams (2/3 sales are aftermarket at John Crane and consumables make up 80% of sales at Medical) and strong focus on self-help through restructuring and cost savings, which offer long-term benefits extending beyond any economic recovery,' the broker notes, adding that the stocks defensive properties means it should show resilience 'despite near-term weakness in challenging end markets.'

The outlook for the company, is mixed, however, though there are some early signs of stabilisation. 'The better start to the year for Detection is encouraging and more medium-term dynamics for the division remain positive, but risk surrounds the general lack of visibility of order flow (increasingly variable) and potential for further contraction at John Crane and Interconnect (late cycle), Charles Stanley analyst Tina Cook suggests.

As ever, speculation about a break-up of the diversified technology group should help underpin the share price, Cook adds.