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Tuesday, May 26, 2015

Weir bucks falling FTSE but AstraZeneca drops on drug disappointment

Leading shares down on Greece worries and strong dollarWorries about a Greek default as conflicting tales about the state of talks with its creditors did the rounds, along with a stronger dollar on hints of a US rate rise this year, combined to send leading shares lower.But there were some bright spots. Engineering group Weir, which supplies equipment to the oil industry, has suffered as the crude price slumped and companies cut back investment. But despite another drop in Brent, signs of improvement in the US industry helped push Weir 65p higher to £20.02. Analysts at Jefferies said:We note a further sequential moderation in the pace of decline in last week’s rig count data (the total US rig count fell by only one last week, which is the slowest weekly decline since December 2014). Weir continues to be a stock that is gathering interest with investors, and with last week’s rig count data/ slowing pace of decline, we suspect this will increase further (we again highlight the strong correlation between Weir’s share price and the rig count and the oil price). Weir is potentially at an interesting inflection point if this data point continues its recent momentum.We had viewed bro-mab as a critical asset to contribute significantly to AstraZeneca’s bottom line from 2017, especially as bro-mab could have been a simple profit stream, as AstraZeneca had no plan for co-marketing a dermatology asset and was supposed to receive a profit share from its 50/50 joint venture with Amgen. Amgen’s decision may not spell the end of the bro-mab. However, in view of increased uncertainty, we have removed bro-mab profits from our earnings model, and hence cut our core earnings per share estimate by 3-9% from 2017-2020, reducing our AstraZeneca valuation from £60 to £56 per share. Continue reading...


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