Emeco drops further after downgrade at UBS

Emeco Holdings has fallen in morning trade after being downgraded to "neutral" from "buy" at UBS in the wake of the heavy earthmoving equipment company's disastrous slide yesterday.

The stock  dropped 3.3% to 29 cents at 1130 AEST – on top of a 20% fall yesterday to 30 cents – after it cut its earning guidance for the second time in two months to between $35 million and $36 million from between $40 million and $44 million.

UBS almost halved its 12-month price target on the stock to 32 cents, but expects Emeco to pull through as the company is trading at large discounts to the investment bank's valuations.

"We believes investors should focus on Emeco's cash generation capabilities, with free cash flow actually improving through the down cycle," UBS said. 

Though Emeco is far from the first company in the embattled mining services industry to post profit downgrades, questions have been raised about its late timing given its peers posted their reduced earnings months ago.

"The macro environment will remain difficult for the Australian mining services sector as they continue to face anaemic demand and fierce competition," UBS said.