Investing.com — Jefferies analysts this week downgraded three leading UK industrial stocks, namely Judges Scientific (LON:JDG), Smiths Group (OTC:SMGZY), and XP (NASDAQ:XP) Power (LON:XPP). The rating for all three companies was lowered to “hold” from “buy.”
Key industrial markets face major challenges, including persistent economic uncertainty and sluggish growth, prompting this move.
As per Jefferies, Judges Scientific faces a prolonged period of weak trading conditions, which led to a reduction in the stock’s price target to 8,500p from 11,700p.
While the company remains a standout for its long-term strategy and operational quality, the analysts flagged heightened vulnerabilities in its end markets and adjusted its valuation accordingly.
Jefferies analysts cast doubt on Smiths Group’s ability to simultaneously achieve sales growth, improved profit margins, and significant free cash flow, a feat that has eluded the company in recent years.
Despite steady operational performance, Smiths’ valuation appears too high to sustain its prior rating, and its price target was revised down to 1,930p from 2,180p.
XP Power, meanwhile, saw a downgrade amid tempered optimism about a semiconductor market recovery.
Jefferies cited lower-than-expected growth in XP’s key industrial technology and healthcare markets and expressed concern about order intake levels failing to meet consensus expectations.
The stock’s price target was cut to 1,440p from 1,700p as Jefferies analysts reduced their 2025 earnings estimates by 15%.
Jefferies’ 2025 industrial outlook warns of broader sector caution. While some later-cycle and defensive businesses have withstood the downturn, cyclical stocks face headwinds.
These include persistent inflation, weak purchasing manager index data, and sluggish industrial production, all of which dampen investor sentiment.
To weather this uncertain period, the brokerage stressed the importance of companies having strong balance sheets and being appropriately valued.
Jefferies upgraded Spirax-Sarco to ‘buy,’ anticipating a recovery from recent setbacks.
The analysts improved earnings over the next two to three years, driven by strategic investments and a focus on high-growth sectors like oil and gas, civil aerospace, and mining.
The UK industrials sector faces a mixed outlook in 2025, with potential for improvement later in the year but significant near-term risks.
This reflects Jefferies’ cautious yet selective investment strategy in the face of an uncertain economic and industrial environment.
