ONE of Weir Group's City followers yesterday upvalued the group for the second time in a month.
Citigroup, which upped its price target for Weir shares by 100p to 1700p at the end of last month, lifted it by another 250p to 1950p.
The Scottish engineering leader's shares closed down 17p at 1974p yesterday. They peaked at 2210p on July 25 and bottomed this year at 1375p on October 4.
Citigroup says it has raised its value target to 12.6 times Weir's expected 2012 earnings, in line with the 12.5 multiple of its "higher-quality" UK peer group and the 12.7 of the European oil services sector.
"Overall, we see Weir's business mix as attractive based on its high emerging market exposure [about 44% of sales] and the longer-cycle growth potential of its key end-markets of oil and gas, mining and power [about 87% of sales]," says Citigroup.
"However, its [current] valuation is in line with the 'higher-quality' UK peers, suggesting the business attractions are largely captured in the share price."
The Citigroup note says the analysis assumes continued global economic growth, specifically investment in areas such as mining and to a lesser degree oil and gas.
"A reversal of the trend could be a negative for earnings," it said.
The note says other risks to consider include input costs and currency, and also cautions that the 12.6 multiple assumed for Weir is higher than the 11.3 of the European mining sector and the 11.0 of the US oil services sector.
The rating is in line, says Citigroup, with those of resilient European engineers such as Rotork and Spirax-Sarco.
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