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(Sharecast News) - Wood Group is "on the right track" with its turnaround, according to Berenberg, but the broker still cut its target price for shares of the energy and materials engineering and consulting business following the group's recent results.
The broker has reduced its target for the shares from 180p to 150p and kept a 'hold' rating on the stock after the company's 2023 results last month. The figures were broadly in line with forecasts, but free cash flow (FCF) is now expected to stay negative for 2024, while net debt was slightly higher than guidance.
"While we recognise that Wood is implementing a turnaround, we would like to see several quarters of improved delivery and better cash generation before we become more confident in the outlook," Berenberg said.
"With moderate expected revenue growth and positive cash generation delayed by another year, we continue to see opportunities elsewhere across our coverage."
While the broker acknowledged that the valuation isn't expensive, it predicts only a "limited likelihood of a re-rating" until the wider market becomes confident of Wood Group's FCF generation.
The stock was trading more or less flat at 130.1p by 1042 BST, but has fallen 12% over the past month and 23% since the start of 2024.
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