Cardno Limited

( ASX:CDD ) - Capital Goods


Cardno’s Sharp Downgrade Disturbs Brokers

Engineering contractor and project manager Cardno (CDD) has warned that first half operating profit will be weak, down around 25% at the mid point of latest guidance, compared with the first half of FY14. The major reason for the downgrade stems from the rolling off of resources work which, as yet, has not been countered by an expected ramp-up in infrastructure spending. Moreover, starting dates for new projects in the Americas have been delayed and costs to integrate new businesses, notably PPI, have been higher. On the infrastructure side, management remains confident that increased spending will assist the bottom line in the second half. Most brokers are inclined to wait and see just how much assistance that does provide.

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Analyst Views

CDD – UBS rates the stock as Neutral

Cardno’s first half update included a profit guidance reduction to $27-31m from a previous $35m. Several factors contributed to the downgrade but an earnings decline from resources-related work in Aust was the main culprit, the broker notes. Management expects a stronger second half but did not provide specific guidance. The broker has cut its FY15 profit forecast by 25%.

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