Bradken says worst is over as results meet expectations

Engineering contractor Bradken's (BKN) full-year results should reassure investors that consensus earnings expectations are not set too high for the next 12-months.

This is important as confidence about the outlook for the sector is fragile with investors bracing for more earnings downgrades as miners cut back on project spending due to volatile commodity prices (see Inside the mining services disaster).

But Bradken’s 4.5% slide in underlying net profit to $96 million for 2012-13, which is less than the 9.5% drop in revenue to $1.32 billion, is a good result in the face of challenging operating conditions.

Investors certainly think so, with the company's share price surging 9.1% to $5.72 at 1356 AEST – the most in six months.

Profit and its 18 cents final dividend are in line with consensus expectations, and management is forecasting earnings to stabilise in the current financial year.

Analysts were only factoring in modest inflation like growth for Bradken, and they are unlikely to downgrade their forecasts materially for the group.

The stock is trading on a 2013-14 price-earnings of around nine times and a generous gross-up yield of 10.5%.