Weir Group maintains Buy rating

On Friday, Goldman Sachs maintained its Buy rating on WEIR Group Plc. (WEIR:LN) (OTC: WEGRY) with a price target of £23.40. The decision follows the company's first-half 2024 results, which aligned with expectations regarding adjusted operating profit. The results showed a year-over-year margin increase of 150 basis points, which balanced a 3% drop in organic sales.

Despite orders and sales falling 5% and 6% below consensus, respectively, the firm acknowledged this mirrored the trend of weaker original equipment (OE) demand observed in companies with less exposure to the aftermarket, which has shown more resilience. The stability of Weir's Infrastructure businesses was noted, demonstrating more robust delivery compared to its peers.

For the full year 2024, Weir Group (OTC:WEGRY) has improved its margin guidance to approximately 18%, adjusting to a softer sales forecast. Analysts from Goldman Sachs see a feasible trajectory for the company to reach its 20% margin goal by fiscal year 2026, underpinned by Weir's leading position in the aftermarket segment and the implementation of cost-saving measures.

Goldman Sachs' projections for Weir's adjusted operating profit are approximately 2% and 4% higher than the consensus for fiscal years 2025 and 2026, respectively. The firm's analysts reaffirm their positive stance on the stock, citing the company’s potential for continued margin improvement and cost efficiency.

In other recent news, WEIR Group has been placed on a Buy rating by Berenberg. The rating reinstatement reflects the firm's positive outlook on WEIR Group's future prospects. Berenberg's price target of £26.00 is based on a dual approach, involving peer group multiples and a discounted cash flow valuation.

The firm notes that WEIR Group's shares are currently trading at a premium compared to the broader industrials sector, a fact justified by the company's unique strengths and strategic positioning.

Several factors contribute to this favorable outlook, including WEIR Group's focused strategy, its reliance on aftermarket services, and its alignment with long-term structural growth trends. These details were all mentioned by Berenberg as reasons for the positive rating.

InvestingPro Insights

In light of Goldman Sachs' recent endorsement of WEIR Group Plc., current data from InvestingPro bolsters the optimistic outlook. With a market capitalization of $6.37 billion and a P/E ratio standing at 22.61, WEGRY demonstrates a balance between valuation and earnings. Notably, the company has a track record of raising its dividend for four consecutive years, indicative of a commitment to shareholder returns amidst its operational achievements.

InvestingPro Tips highlight the company's low price volatility and a robust financial position where liquid assets surpass short-term obligations. This financial stability is crucial for investors looking for a reliable stock in uncertain market conditions. Moreover, analysts predict profitability for the current year, which aligns with Goldman Sachs' positive projection.

For those seeking a deeper dive into WEIR Group's potential, InvestingPro offers additional tips on the company's performance and outlook. As of now, there are five more InvestingPro Tips available, providing a comprehensive analysis for informed investment decisions.

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