Numis Securities gave a boost to Spectris PLC (LSE:SXS) shares today, upgrading its rating for the FTSE 250-listed instrument and controls supplier to ‘hold’ from ‘reduce’ following the firm's recent results.
The City broker also upped its target price to 2,800p from 2,750p, with Spectris shares currently trading at 2,789p, up 1.9% on last night's close.
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In a note to clients, Numis analysts said that the capex cycle is positive and this drives Spectris' top line and operational gearing whilst Project Uplift benefits are still to flow through.
They said: “Add in the rating, which is not stretched, and the shares should continue to perform.”
However, the analysts added: “Our concerns are over the strategy of mixing an equipment and service business and whether the management can deliver an acceptable ROI on the recent service expansions.”
Phase I of Project Uplift, the company’s restructuring programme aimed at internal efficiencies and cost savings, is now expected to cost £35mln, with £25mln of savings by 2020.
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The Numis analysts believe that Spectris's management are confident of the benefits flow, with many of the savings in procurement where agreements are in place.
They explained: “It simply takes time for old agreements/stocks to flow through the system. This suggests that the overall benefit to 2018 will be limited, but from 2019 the charges decline and the cumulative benefits should increase significantly from 2019.”