Intertek Earnings: Back on Track

Intertek ITRK has lagged its peers for more than a year now, but narrow-moat Intertek is finally catching up in terms of performance. Like-for-like growth of more than 7%, combined with improving operating margins, marks a solid half-year set of results. We don’t expect to make any material changes to our forecasts on the back of this announcement. Our GBX 5,700 fair value estimate offers significant upside from the current share price.

Intertek’s outsize exposure to China and the consumer segment hit performance last year, but revenue growth in the first half of this year from this region is now matching that of other regions. The consumer products business, which generates almost 30% of group revenue, fared better than peers, with revenue up 1% on a like-for-like basis, despite the slowdown in global consumer demand. Management guided to low-single-digit growth for the full year, giving us confidence that at least the situation is not worsening. We welcome the company’s recent change in divisional reporting, with the structure moving from just three divisions to five now.

As one of only three truly globally diversified testing, inspection, and certification firms, we believe Intertek is well placed to benefit from several structural trends in the industry such as increased outsourcing, implementing further regulation, and a tilt to higher-value activities by the main industry players.