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Jefferies downgrades IMI, Rotork and Oxford Instruments

LONDON (ShareCast) - (ShareCast News) - Jefferies downgraded IMI (LSE: IMI.L - news) to 'hold' from 'buy' and cut its price target to 1,150p from 1,050p as it took a look at the UK capital goods sector. Jefferies said there is an attractive long-term investment case at IMI, but the near-term outlook for the group still faces challenges from the remedial work it is undertaking and underlying markets are difficult.

"Mark Selway and his team will make IMI a better business and his plans for the group on a 2-3 year view appeal, but we have been guilty of focusing on the wood (long-term) and not the trees (short-term)," it said.

It (Other OTC: ITGL - news) said this is merely "a pause for breath" ahead of the third-quarter update and until it gets comfort with regards to next year.

Jefferies added that the shares are not aggressively valued and yield around 4%.

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It also cut its rating on Rotork (LSE: ROR.L - news) , to 'underperform' from 'hold' and trimmed the target price to 155p from 240p.

It said that as evidenced by last week's trading update and conference call, the company's core end markets are difficult and deferrals/cancellations are creating additional difficulties.

"Rotork's strengths as a business are well-entrenched and it remains a great business, but these are unprecedented times for the group in many respects and unlike most UK Industrials, huge cost saving programmes are unlikely." Finally, Jefferies cut Oxford Instruments (Other OTC: OXGGY - news) to 'underperform' from 'hold' and slashed the price target to 535p from 925p.

"We continue to have grave reservations about the group and its earnings stream. On the back of this, and as we believe a discount to the wider UK Industrials sector is appropriate, we move to underperform." At 1432 BST, IMI shares were down 4.7% at 969.50p, Rotork was off 1.9% at 171.70p and Oxford Instruments was 2% weaker at 570.50p.