Citi cuts the European engineering sector to “neutral” from “overweight” as expectations for earnings growth continue to decline for the industry despite a more positive economy.
“EPS can turn positive from here, but that improvement will likely be slow and the occasional downgrade is still likely,” the bank writes in a note.
Citi also cuts its rating on Schneider Electric to “sell”, saying the French engineering firm’s organic profit growth and return on invested capital is below the sector average.
The brokerage named ABB, GEA, IMI and Sandvik its “key buys” in the sector. It listed Metso, Philips, Schneider and SKF its “key sells” in the sector.
In a review of the European engineering sector in February, Citi downgraded its stance on blue-chip British engineers Weir Group and Smith Group on valuation grounds.
Shares of Schneider Electric were down 1 percent at 50.48 euros by 1018 GMT on Friday.