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Morgan Stanley sees market moving away from Wood Group

Morgan Stanley downgraded Wood Group to 'underweight'
oil and gas operations
Analysts reckon investors will move towards cyclical and operational gearing

John Wood Group PLC (LON:WG. shares have been downgraded by Morgan Stanley because it thinks the market may be moving away from the oil services group’s strengths.

Morgan Stanley moved it to ‘underweight’ from the previous rating of ‘equal weight’ as it sees growing investor appetite for cyclical and operational gearing, and, this is an area where Wood Group compares less attractively than others in the sector.

READ: Wood Group highlights good trading momentum in the first quarter

“Therefore, we think the risk of Wood Group becoming a value trap could increase as the cycle moves into full gear toward 2020,” analyst Robert Pulleyn said.

The analyst added: “Whilst we see upside risk to peak multiples, it is less for other stocks and subject to the company reversing recent disappointments around results.

“Furthermore, we think the market will be unwilling to pay up for synergies ahead of time, as seen in other transactions in the sector (as we see the market requiring evidence of such savings before capitalising them).”

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