LONDON (ShareCast) - (Sharecast News) - Analysts at Berenberg raised their target on oil field services group John Wood from 230p to 300p on Monday, stating the company had managed to protect margins throughout the coronavirus-fuelled downturn.
Berenberg noted Wood had reacted to the downturn by cutting costs, which it said should leave margins "resilient" despite lower activity.

In the first half of the year, revenues at John Wood were down 11% year-on-year when adjusting for divestments, and Berenberg now forecasts for revenues to drop 9% for the 2020 fiscal year as a whole.

However, underlying earnings margins only fell 70 basis points, which Berenberg said it viewed "positively", demonstrating the ability of the group to protect margins.

The German bank did warn that revenue slippage was a risk for the tail end of the year given the current environment but looking to 2021 and beyond, it said the "outlook appears brighter" - underpinned by structurally rising activity in chemicals, renewables and the built environment, along with a cyclical recovery in oil

Berenberg also highlighted that the business was gradually pivoting away from conventional oil, gas and renewables and said its move to the built environment offered "growing alternative sources of revenue".

"While there are limited near-term catalysts, if execution and cash flow generation can remain solid, we think there is further upside, and increase our price target to 300p," said the analysts, which also reiterated their 'buy' rating on the group.

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