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On Thursday, UBS analyst Ed Hussey upgraded WEIR Group Plc. (WEIR:LN) (OTC: WEGRY (OTC:WEGRY)) stock rating from Neutral to Buy, setting a new price target of GBP28.50, an increase from the previous target of GBP22.50. The upgrade reflects a positive outlook on the company’s ability to surpass expected cost savings from its Performance Excellence plan. According to InvestingPro data, WEIR Group currently trades at an attractive P/E ratio of 18.9x, with strong financial health metrics supporting the bullish outlook.
WEIR Group, known for its engineering services, has been focusing on its Performance Excellence program, which was initially announced in September 2022. Since then, the company has twice raised its cost savings guidance. The program’s initial target was set at £30 million, but this forecast was later increased to £60 million for 2023 and further to £80 million for 2024. The company’s solid financial foundation is evident in its healthy current ratio of 2.32 and moderate debt levels, as reported by InvestingPro.
UBS’s analysis suggests that WEIR Group could achieve even greater savings than the company’s current guidance. The firm estimates potential savings of £125 million by the end of 2026, which is £45 million more than the guidance. This additional savings could translate into an incremental +1.6% adjusted EBITA margin in 2026.
The new adjusted EBITA margin forecast by UBS for WEIR Group stands at 23.4% for the year 2026, notably higher than the consensus estimate of 20.4%. According to UBS, this significant margin expansion potential has not been fully recognized by the market, which is currently pricing in only £80 million of cost savings.
Additionally, UBS believes that WEIR Group is well-positioned to weather potential economic downturns, particularly in the wake of recent tariffs. This resilience, combined with the anticipated benefits from the Performance Excellence plan, underpins the analyst’s optimistic view on the stock.
The upgrade by UBS comes as a strong signal to investors regarding WEIR Group’s future financial performance, with the firm’s analysis pointing to robust cost management and margin improvement capabilities within the company. InvestingPro data reveals impressive fundamentals, including a 40.23% gross profit margin and 18% return on equity, with 7 additional ProTips available to subscribers suggesting further growth potential.
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