Aggreko plc (LON:AGK) shares are upgraded from Sell to a Hold rating by S&P Global analyst Ibrahim. The brokerage also boosted its price target from GBP7 to GBP10. This will reflect a 2017 PE of 16.7X. This is on par with the company’s five-year historical average forward PE of 16.9X.
The analyst believes that his price objective balances Aggreko’s potential return to earnings growth in 2018 fairly following the current drag from the inherited Argentina contract.
In his research note to clients, Ibrahim commented, “We cut our 2017 EPS to GBP0.60 (GBP0.69) as AGK guided that 2017 profit before tax will be lower than 2016. Overall, 2016 results were within expectations. Profit before tax fell 12% on lower revenue (-10%) and margin contraction (-2%-pts) from the decline in North America oil & gas, absence of participation in major events, off-hires and negative pricing situation. “
The brokerage turned positive though modest on three factors. One is the oil price development while the second factor relates to fresh contracts from big events in 2018. The third factory is a healthy pipeline of order. However, the analyst thinks that the inherited Argentina contract would continue to be a drag in the near-term performance.