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Numis downgrades Diploma to 'add', ups target
Analysts at Numis downgraded their recommendation for stock of Diploma from 'buy' to 'add' despite raising their target price on the shares in the wake of the company's "encouraging" trading update for the first quarter.
In particular, they highlighted the 8% jump seen in the technical products and services supplier's organic sales during the period and the "moderate" improvement seen in its operating margins.
They also lowered their effective tax rate assumptions for the company to account for recent changes to US tax laws.
Thus, the outfit's ETR was now seen coming down from about 26.5% in 2017 to roughly 24% in 2018 and 23.5% for both 2019 and 2020.
Following on from the above, they estimated the company's earnings per share would be approximately 1.5% higher over the next three years, rising to 55.2p, 59.3p and 62.7p, respectively.
Nonetheless, with less than 20% of upside now left to their new target price of 1,350p (up from 1,300p previously), they downgraded the shares.