Supply Chain Disruptions Hit Spirax-Sarco's Third-Quarter Revenue; FVE Maintained

Having been priced for perfection, a tough third quarter for wide-moat Spirax-Sarco Engineering has been met with some disappointment by the market. Shares fell 5% at the opening of the market following its third-quarter trading update. Although limited financial details were provided, supply chain disruptions have lowered global industrial production forecasts and affected the order deliveries. As a result, revenue was lower than management's expectations in the third quarter. Nevertheless, demand and order growth remain strong and thus we maintain our GBX 10,910 fair value estimate. Full-year guidance for record levels of revenue and operating margins of approximately 25% were reiterated. We view shares as richly valued, currently trading at a 51 times price/earnings multiple on our 2021 forecast earnings.