Investment summary

XP reported weaker than expected Q411 trading as customers pushed out orders and, based on Q4 orders, the company expects a weak Q112. Consequently we have cut our revenue and EPS forecasts for FY11 and FY12. Despite lower shipments, XP should be able to maintain strong margins, and market share gains should help to mitigate the impact of weaker end demand. In our view, the share price already reflects concerns about weaker end demand, and the stock is modestly valued with dividend yield support even after our estimate cuts.

Last updated on 09/01/2012

Industry outlook

The three end-markets supplied by XP have recovered at different rates. Healthcare equipment manufacturers are reporting bookings and revenue growth, and improving book-to-bill ratios after a period of weakness. Technology customers rebounded strongly in 2010, while the industrial sector finally seems to be in recovery mode.

Last updated on 09/12/2011