JP Morgan reiterates overweight stance on Intertek

JP Morgan analysts Robert Plant, Chris Gallagher and Jolyon Wellington on Wednesday reiterated their 'overweight' recommendation on shares of testing services firm Intertek.That followed a meeting with the company's chief executive officer, Wolfhart Hauser, on Tuesday afternoon."It was an interesting meeting and it seemed to us that, after a weak first half, trading should improve somewhat in the second half and then into next year," the analysts said.Management reiterated its revenue guidance from the first half results presentation, saying the outlook for the second half was better and they expect growth in the range of between 2% and 3%.Nevertheless, the chemicals division is expected to still see a decline in the second half of this year, but to then flatten out in 2015 and subsequently improve in 2016.As for the more subdued outlook for minerals at Intertek than at rival SGS, the broker pointed out the fact that the two companies have different product and geographic exposures. Intertek was also especially affected by the nickel export ban in Indonesia.Lastly, JP Morgan emphasised how the business appears to have become more cyclical over the last decade, as the more stable prototype testing business's share of revenues has decreased from 90% of revenues to 60%. In parallel, the company has been expanding into more cyclical minerals testing within the commodities division and energy infrastructure within Industry & Assurance.