Analysts are becoming increasingly confident of earnings outperformance potential across the engineering sector. Investment bank UBS is among those to have picked up on the trend.

UBS believes eight out of 13 UK engineers beat expectations on organic top line growth in the third quarter of 2017 (July to September). They calculate average organic growth in the period was running at 7%.

‘Fenner (FENR) and Renishaw (RSW) saw significant earnings per share upgrades and were the best performing shares,’ say analysts at UBS.

Since the end of June shares in Fenner and Renishaw have rallied 42% and 48% respectively.

More to come from some

Earnings momentum is still to be fully recognised in some share prices.

‘We also see full year upside potential for consensus at Bodycote (BOY) and Vesuvius (VSVS) after strong third quarter top line progression,’ add the UBS team.

Shares in this latter pair have performed well since late June, although their more modest respective gains of 18% and 9.5% may imply further upside to come.

In a sector-wide research note in late October stockbrocker Peel Hunt flagged a ‘much stronger global trading backdrop,’ being enjoyed by sector constituents.

‘The fundamental outlook for broader UK industrial companies is one of enormous opportunity,’ it noted. (SF)

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