Bouygues shares fall after Bank of America downgrades rating

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Bouygues shares fall after Bank of America downgrades rating
Credit: © Reuters.

By Scott Kanowsky -- Shares in Bouygues SA (EPA: BOUY ) dropped to near the bottom of the pan-European STOXX 600 on Monday after analysts at Bank of America cut their rating of the French industrial group to "underperform" from "neutral."

In a note to clients, the analysts argued that the expectations for financial performance at Bouygues - a conglomerate owned by billionaire industrialist Martin Bouygues and his family that has operations focused on everything from construction to telecoms - have yet to factor in broader economic headwinds and potential recessionary pressures.

As a result, the Bank of America analysts slashed their estimates for near-term earnings before interest and taxes at Bouygues' construction unit and flagged that its telecom division will face an elevated cost base.

Its price target for the group was lowered to €27 per share from €30 as well.

Bank of America previously lowered its rating for Bouygues to "neutral" last year, citing "asymmetric downside risks" and a "full" valuation.

"Heading into 2023, we see much of the same with incremental construction earnings risk from the macroeconomic environment," the analysts said.

The decision also comes after Bouygues scrapped its profit margin outlook at its Colas road building division in November due to the "inflationary environment, particularly in countries bordering Ukraine." In a statement, the Paris-based company said it no longer expects Colas to register an operating margin of 4% in 2023. Instead, it now sees the business posting an unspecified annual increase.

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