The US investment bank also cut its target price for the FTSE 250-listed oil services group by 22.2%, to 700p from 900p, albeit with the stock trading at 532p, down 25p on Thursday’s closing price.
In a note to clients, Morgan Stanley’s analysts noted that the company’s guidance for modest growth in underlying earnings (EBITDA) in 2018 suggests zero organic EBITA growth once synergy benefits from last year’s takeover of Amec Foster Wheeler (AMFW) are factored in.
They said they expect multiple expansion in the near term due to limited proof of progress on the AMFW integration and organic growth.
But the analysts think the headwinds for Wood Group in 2018 are temporary and therefore see an opportunity to unlock value in the future.
However, they believe it will take time for this value to be realised with few near-term catalysts.