On Tuesday, RBC Capital Markets shifted its stance on Bodycote Plc. (LSE:BOY) (OTC:BYPLF), upgrading the stock from Sector Perform to Outperform, despite a reduction in the price target to £7.00 from £7.20. The upgrade comes after Bodycote's shares experienced a significant decline over the past three months, contrasting with a modest increase in the broader sector.
Bodycote, a provider of heat treatment and specialist thermal processing services, has seen its shares drop by 21% in the last quarter, while the sector it operates in has seen an overall growth of 2%. The company has faced several challenges recently, including pressures in the automotive, aerospace & defense, and general industrial segments.
These trading headwinds have led RBC Capital Markets to revise its earnings per share (EPS) forecasts for Bodycote for the years 2024 and 2025, reducing them by 5-6%. Despite this, the firm believes that the current share price offers attractive value. The analyst noted that Bodycote's margins are still below pre-Covid levels, suggesting room for improvement.
With a change in leadership, as a new CEO is poised to take the helm, RBC Capital sees potential for the company. The new CEO is expected to lead a Capital Markets Day in December, which could reveal additional self-help strategies that may benefit the company's performance.
RBC Capital's upgrade indicates a positive outlook for Bodycote's future, emphasizing that the current share price could represent a favorable opportunity for investors. The firm's analysis suggests that despite near-term challenges, there are factors that could lead to a stronger performance for Bodycote in the longer term.
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