Spirax-Sarco Earnings: Trading Update Confirms Solid Outlook for Fiscal 2024; Shares Undervalued

Investors in wide-moat Spirax-Sarco should favorably view its brief trading update that indicated low-single-digit organic revenue growth during the first four months of the fiscal year. Particularly pleasing is that all three of its operating segments recorded organic growth, an indicator that its Watson-Marlow division is likely through the worst of customer destocking from the biopharmaceutical sector and that the segment’s poor showing in fiscal 2023 was cyclical and not structural. Full-year guidance of mid- to high-single-digit organic revenue growth and low-double-digit organic operating profit growth was maintained. Spirax’s shares screen undervalued to our unchanged GBX 10,600 fair value estimate. We believe uncertainty surrounding the timing of a recovery in sales and its new management team are weighing on the share price, presenting a buying opportunity.