Friday tips round-up: GKN, Devro

GKN's first quarter profits were deceptively weak as once extraordinary charges and acquisition costs are stripped out then they were in fact rather flattish. More importantly even, its recent decision to purchase Volvo's aerospace arm looks increasingly to have been a fortunate one, as the sector's two main end clients - Boeing and Airbus - are beginning to ramp up production, with the first clear benefits for GKN starting to come through. As well, the automotive sector will come back, although possibly not yet this year. They sell on nine times this year's earnings. As further benefits from aerospace arrive they look to have further to go, writes The Times's Tempus. Shares of GKN have been side-lined of late due to investors' worries about a slowing automotive market. Those preoccupations seem justified given recent registration figures both at the European level as well as in stalwarts such as Germany. Even so, the firm's Driveline business - which manufactures components for that sector - saw a large rise in sales in both China and Brazil. Sales at its aerospace arm, however, rocketed by 47%, although they were up by a more modest 3% in organic terms. Even so, that came despite the decline in military sales. In any case, trading on a 2013 earnings multiple of 9.4, falling to 8.2, the shares remain a buy, says The Telegraph's Questor team. Devro, the sausage skin maker, fell yesterday after the market learned that its first quarter profits would be weaker versus a year ago due to "unspecified" problems at its aging South Carolina plant, which is in the process of an upgrade. Nevertheless, this coming summer the company is expected to finish fitting the latest technology at its facility in the Czech Republic. As well, it has just introduced a new product line. The company's fortunes are tied to the rising trend in protein consumption, especially in emerging economies such as Russia. Hence, analysts forecast revenues to grow in the mid-single digits in the next few years. A valuation of 15 times earnings seems "up with events," but the lack of any obvious comparator as ever makes valuation tricky, Tempus says. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB