Electrocomponents Plc (ECM) and Premier Farnell Plc (PFL) fell to the lowest in at least a month in London after analysts at Credit Suisse Group AG (CSGN) downgraded the electronics distributors on concern of slower growth recovery.
Electrocomponents, based in Oxford, England, fell as much as 2.9 percent to the lowest intraday price since May 9 and was down 2.5 percent at 256.2 pence at 12:20 p.m. in London, paring the gain this year to 8.6 percent. London-based Premier Farnell declined as much as 4.5 percent to the lowest since April 16, and was down 4.3 percent to 200.5 pence, cutting its gain to 2.7 percent this year.
The “shares have done well in the recent cyclical rally,” Credit Suisse analysts based in London, including David Rigby, said in a note to clients. “We believe the near term outlook has moderated, with the organic growth recovery likely to be more gradual than we had previously expected.”
The pick-up in electronics indicators seen for later this year and early in 2014 has dissipated and is barely sufficient to offset continued weakness in the maintenance market, Credit Suisse said. The muted sales recovery limits further improvement to the two companies’ earnings estimates, dividends and share prices, the analysts said.
Credit Suisse cut the ratings on both stocks to neutral from outperform, lowered earnings estimates for fiscal years 2014 to 2106 and reduced the 12-month price estimates.
“With limited upside to our price targets we downgrade both to neutral, seeing more undervalued growth elsewhere amongst stocks currently valued as cyclical,” they said.
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