Making pumps and flow control gear used to drill for shale oil and gas guaranteed
Weir's underlying operating profit surged a third to £413m despite a small dip in margin to 18 per cent. Sales of parts to oil and gas explorers doubled to £613m, driving divisional sales up 65 per cent to £743m and profits up 61 per cent to £183m. A record fourth quarter swelled the upstream order book by over a half to £723m as companies geared up for a busy 2012. Management expect sales here to "slightly exceed" $1bn (£627bn) this year, but that's not much better than the $982m clocked up in 2011, and there is a risk that weak US gas prices could damage demand from drillers.
Still, a record order book and sky-high oil prices make chief executive Keith Cochrane upbeat and broker Merrill Lynch agrees, forecasting a 20 per cent-plus hike in adjusted EPS to 162p (133.6p in 2011) and not without foundation. The massive North American shale market is still growing, while places such as Poland, Argentina and China are ramping up uncoventional drilling activity. The minerals division had its best year, too.
|ORD PRICE:||2,186p||MARKET VALUE:||£4.6bn|
|TOUCH:||2,183-2,187p||12-MONTH HIGH:||2,254p||LOW: 1,332p|
|DIVIDEND YIELD:||1.5%||PE RATIO:||17|
|NET ASSET VALUE||528p*||NET DEBT:||60%|
Given that long-term structural drivers remain in place and priced on a reasonable 13.5 times forward earnings, the shares rate a buy.
Last IC view: Good value, 2,075p, 2 Aug 2011