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Share Centre stock of the week: Smiths Group

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Written by:
23/11/2015
Helal Miah, investment research analyst at The Share Centre, picks Smiths Group as stock of the week.

We have chosen Smiths Group as our share of the week. This is a diversified global industrial technology company with five divisions spanning oil and gas support services, security scanning equipment, medical devices, electronic communications parts and services, and components for heating liquids and gas for various industries.

In a trading update in November, the new CEO said that group trading was resilient despite the tough conditions faced by its oil and gas support services division John Crane, where revenues fell by 2%. However, investors should note that there was good profitability growth in Smiths Detection, which provides sensors that detect explosives and weapons, while performance was in line with expectations across the group’s other divisions.

Over the years there have been many calls for the conglomerate to be broken up, but in its current form the shares carry less risk. Although Smiths Group recently reported full year revenues down by 2% to £2,897m, its operating profits rose by 1%, in-line with market expectations.

The shares compare favourably against the peer group and pay an attractive dividend yield close to 4%. As a result, we continue to recommend Smiths Group as a ‘buy’ for investors seeking a balanced return and willing to accept a medium level of risk.

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