Support services and engineering sectors stand out from the recent corporate earnings season with a large number of companies beating forecasts.

UBS says more than half of stocks in its European support services coverage beat earnings expectations. It says on average the stocks beating expectations went up by 1.3% and those missing expectations fell by 6.4%.

Its most preferred UK-listed support services stocks includes security firm G4S (GFS) which it believes should benefit from innovation. UBS says a de-rating in distribution group DCC (DCC) providers a good entry point to a ‘best-in-class compounder’. It also likes credit reporting agency Experian (EXPN).

Eight out of nine UK-listed engineers covered by UBS beat its revenue forecasts yet forward year earnings upgrades were only a modest 1%. Rising costs are an issue and seven out of the nine engineers reported lower than expected profit margins.

It only has three ‘buy’ ratings on UK engineers, being Bodycote (BOY), Vesuvius (VSVS) and Rotork (ROR). It has ‘sell’ ratings on Halma (HLMA), Renishaw (RSW) and Spectris (SXS) based on a mixture of valuation and growth risks.

We note that Fenner (FENR), another UK-listed engineer, received a £1.3bn takeover bid from Michelin on 19 March. (DC)

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