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Citi downgrades 'less compelling' Forterra
With Forterra's risk-reward prospects looking "less compelling", analysts at Citi chose to downgrade their stance on the heavy building materials supplier to 'neutral' from 'buy' on Wednesday.
Forterra's recent trading update "looked reassuring" to Citi, despite difficult weather and the group's plan to increase brick capacity around 16% by 2022-23 convinced the bank that medium-term volume growth, along with a reduction in operating costs from its new, larger facility, would support and drive further margin improvement.
However, Citi said that capacity constraints would likely limit near-term growth prospects, hence the downgrade. The bank said it reckoned earnings momentum over the next three years would be "less exciting".
As Forterra's stock was up more than 28% over the last year, Citi pointed to "limited gains" given the prospect of sluggish earnings growth in the near term.
Despite the downgrade, Citi upped its target price on the stock to 350p from 342p.
At 1226 BST, the shares were down 1.8% to 327p.