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Weir Group PLC Anticipates Growth In 2014

WeirGroupLogoThe share price of Weir Group (LSE: WEIR) increased a little over 4% to 2,452p during early trading this morning, making it the top riser in the FTSE 100.

Despite profits falling 5%, investors were prepared after the firm announced a profit warning in November, based on weak currency markets in the US and Australia.

The engineering firm, which makes equipment for oil and gas companies, posted £431m profit against £421m the year before, with trading in the US adversely impacted by low natural gas prices.

Operating margins stayed broadly stable at 9.5%, reflecting growth in the valve manufacturing business offset by investments made to provide future growth.

In 2014 the firm anticipates growth somewhere around 5% in North American and Middle Eastern investments, assuming oil and gas prices remain stable.

The chief executive, Keith Cochrane, commented:

“2013 was a challenging year in many of our end markets but our relative outperformance demonstrated the strength of the Group’s strategy, the diversity of our portfolio and the resilience of our aftermarket focussed business model.  This was supported by a robust performance from Minerals and growing momentum in Oil & Gas as we saw a gradual recovery in upstream markets.  

In 2014, we anticipate that the Group will return to underlying growth despite mixed end market conditions.  We will continue to capture profitable aftermarket opportunities, cross selling our full product portfolio across all our end markets and delivering further efficiencies from our Value Chain Excellence initiatives. Strong cash generation is expected to continue assisted by further working capital initiatives.”

Earnings per share fell 2% to 145p while there was an 11% increase to 42p in the full year dividend. Therefore, following this morning’s price movement, shares in Weir Group may trade on a P/E of 17 and offer an income of 1.7%.

Of course, the decision to ‘buy’ — based on those ratings, today’s results and the wider prospects of the engineering sector — is your decision to make.

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> Mark does not own shares in Weir Group.