Share Prices & Company Research

Market News

20 Jan 2021 | 13:19

Berenberg says 'buy' Diploma for earnings momentum

(Sharecast News) - Berenberg upgraded Diploma to 'buy' and reduced Morgan Advanced Materials and Electrocomponents to 'hold' as the broker homed in on earnings momentum for UK industrial groups. Most companies are trading at or near record high valuations after a rally in late 2020, Berenberg said. Investors should seek out companies with earnings momentum from mergers and acquisitions, overly cautious expectations or end markets that revive faster than expected, the broker said.

"With synchronised global growth on the horizon, the industrials sector is poised for a significant recovery in financial performance," analyst Anthony Plom wrote in a note to clients. "However, we think this strong recovery is already being priced into many share prices. We are therefore convinced that earnings momentum will remain a key factor in share price performance in 2021."

Berenberg listed Ceres Power, Diploma, Rotork, RHI Magnesita and Oxford Instruments as its top 'buy' picks, upgrading Diploma from 'hold' as a "rare entry point into a multiyear compounder". Its least-favoured stocks, all rated 'hold', are Avon Rubber, Morgan and Electrocomponents, both cut from 'buy'.

The broker said there was always money to be made in the UK industrial sector with the top share outperforming the worst by about 150% each year. Its top picks each have 40-100% upside on the bull case and least-preferred names have 20-40% downside in a bear-case scenario, Plom said.

On end markets, Berenberg fabvours clean energy, semiconductors, general manufacturing and steel with oil and gas possessing the biggest surprise potential. Civil aerospace and coronavirus-related healthcare look less positive, it said.

Oxford, Spectris and Rotork have the most options for M&A and private equity firms awash with cash may attempt takeovers, Plom said.

Aside from its top picks Berenberg said consensus expectations appeared conservative for RHI Magnesita, Vesuvius, RPS Group, Vitec and Hill & Smith.

Get in touch today
Join Redmayne Bentley
Talk to us now about opening a new account or transferring your account from another provider
0113 243 6941
Get in touch today
Contact your local office
Contact your local office to find out more
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
Continuing our Personal Service: View our Latest COVID-19 Update: 7th October 2021
We use cookies on this site to improve your experience and help us provide you with a better website. An explanation of the cookies we use and their purpose can be found within our Cookie Policy. Your continued use of this site means you consent to the use of cookies.