Shares in British testing, inspection, and certification firm Intertek Group sheds 1.5 percent, a top five FTSE 100 faller, with the index up 0.1 percent, as traders cite the impact of a downgrade in rating by Jefferies International to “underperform” from “hold”, mainly made on valuation grounds.
Jefferies points out that Intertek, up 12 percent since November versus an 8 percent advance by the FTSE 100, may be more susceptible to continued weakness in commodities and a more challenging industry space.
“Recent moves in consensus earnings forecasts have been slightly down and with no catalyst for upgrades in the near term, the continued re-rating has left valuations looking vulnerable,” the broker says in a note.
Jefferies says that while third-quarter updates from Intertek and its French peer Bureau Veritas were broadly in line, and Swiss group SGS’s investor days prompted small downgrades, the re-rating has continued, with all three major testing firms now trading close to prospective price earnings multiples highs, and close to all time relative highs.
“At these levels we need upgrades for current valuations to be maintained and we do not consider this likely over the next 3-6 months,” the broker says.
Jefferies repeats its “underperform” rating on Bureau Veritas, and “hold” on SGS, with only minimal changes to forecasts and no changes to price targets for either.
Bureau Veritas shares are up 0.3 percent in Paris, while, in Zurich, SGS gains 0.5 percent.
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