The FTSE 100’s Spirax-Sarco share price soars as it expects to beat guidance!

The Spirax-Sarco Engineering share price has rocketed in midweek business. Here’s why the FTSE 100 firm is shooting higher again.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image of person checking their shares portfolio on mobile phone and computer

Image source: Getty Images.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

UK share prices are back on the front foot on Wednesday following recent meaty losses. The FTSE 100 is stepping back towards the critical 7,000 marker as modest dip-buying emerges. And Spirax-Sarco Engineering (LSE: SPX) is currently the index’s biggest riser in midweek trading.

At £119.50 per share, the steam system and pump manufacturer was last trading 3% higher on the day.

Growing ahead of the market

Spirax-Sarco has bounced back on Wednesday thanks to a positive reception to fresh trading details.

At its AGM the FTSE 100 firm said organic sales growth in the four months to April “was ahead” of growth in the broader global industrial production (IP) market. It noted that the IP marketplace rose 7.4% in the first four months of 2021. This was also ahead of the 6.1% increase for January-April it had predicted in March.

Its Watson-Marlow unit “continued to experience exceptional Covid-19 vaccine-related demand from its customers in the Pharmaceutical & Biotechnology sector”. Sales at this particular division account for just over a quarter of the group total.

Elsewhere, organic sales growth across Spirax-Sarco’s Steam Specialties, Electric Thermal Solutions and Watson-Marlow’s Process Industries sectors also outperformed expansion in the broader global IP market.

Markets recover faster than expected

Speaking more broadly, Spirax-Sarco said “the world is recovering faster than previously anticipated from the adverse economic effects of the Covid-19 pandemic, supported by sizeable fiscal stimulus packages”. As a consequence, it thinks the IP sector will grow 8.5% in 2021. This is upgraded from the 7% improvement the company predicted two months ago.

However, the FTSE 100 business cautioned that forecasts could be subject to further revisions. This is due to “the difficulties faced by many emerging economies in implementing their vaccination plans and the continued uncertainty surrounding the ability to resume normal international trading activities,” it said.

Spirax-Sarco hikes guidance

For the moment, it thinks Watson-Marlow’s organic sales to the Pharmaceutical & Biotechnology sector “will be over 55% in 2021 due to continuing strong COVID-19 related demand.” sales to these customers accounted for 55% of all Watson-Marlow revenues in 2020.

The company also predicted that its other revenue streams will deliver organic sales growth in 2021 above the increased forecast for global IP growth. And it said its Electric Thermal Solutions unit “ended 2020 with a higher than-normal order book”. This is expected to add at least a further £8m to sales in 2021.

Finally Spirax-Sarco said that it is “accelerating capacity expansion initiatives in Watson-Marlow and we continue to step-up our revenue investments”. These increased expenditures are weighted towards the second half of 2021. When taken together with higher sales growth and the impact of operational gearing, it expects the annual drop-through from the organic increase in sales to operating profit to be close to 35%. This is also above its previous guidance.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »