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Weir recommended as a ‘hold’ for investors as 2015 outlook looks bleak

26th February 2015 Print

As Weir reports its full year results Graham Spooner, investment research analyst at The Share Centre, explains what this mean for investors.

“Following its full year results reported this morning, shares in Weir fell by over 9% after the company warned it was preparing for a difficult year ahead. It reported that in a challenging 2014, both order input and revenue on a constant currency basis had increased and profit before tax was up 7%. However, as a result of the significant fall in the price of oil and other commodities, it predicts that lower revenues and operating margins will be experienced in 2015. 

“The group’s performance is linked to the price of commodities, with over half of its sales and profits coming from the mining sector and a significant amount from after-sale services. Like many others in the sector, the company has responded to these market conditions by taking additional measures to reduce operating costs. However, investors should note that these measures cannot offset the impact of reduced demand and associated pricing pressure.

“We currently recommend Weir as a ‘hold’ for medium risk investors, as the share price has potentially factored in the sector woes and fallen by around 35% since September. The group has been increasing its exposure to shale oil and gas, if the oil price were to stay low for a lengthy period, the company’s expansion and exposure to US shale oil could be a significant future head wind. As a result, there is every chance that share price volatility will remain.”