Broker snap: Investec upgrades Spectris after sell-off



LONDON (ShareCast) - Following a sharp fall in the share price of instrumentation and controls company Spectris (Other OTC: SEPJF - news) on Friday after its first-quarter trading update, Investec (LSE: INVP.L - news) has upgraded the stock from 'hold' to 'buy'.

The stock slumped by over 15% from 2,225p on Thursday's close (before the statement) to just 1,880p by Monday's close after the firm reported a decline in sales on Friday due to a deferral of orders and shipment delays.

Analyst Michael Blogg said: "Spectris rarely scares investors and, arguably, the reaction to Friday's update has been excessive. The 9.0% revenue decline in Q1 arose from a combination of challenging comparisons with strong trading a year earlier, delivery phasing that was either pre-arranged or caused by slippage into Q2, and a disappointing tendency among customers to conserve cash."

Nevertheless, he said: "Spectris does not quantify or guide on quarterly revenues, only the H1:H2 bias, and we sense that it was less surprised at a year-on-year decline in Q1 than we were and more confident of a bounce in Q2, with its knowledge of the contributory elements."

Investec has cut its annual earnings forecasts by a precautionary 5.0% on 2.2% lower revenues.

The target price has come down to 2,330p, from 2,575p previously due to reduced earnings estimates and the de-rating of peers.

The stock rebounded strongly on Tuesday, trading 6.86% higher at 2,009p before the close of trade.