Australian mining services stocks have plummeted after Emeco's earnings downgrade yesterday as investment banks cast a downtrodden view over the industry.
At 1230 AEST diversified mining services provider Ausdrill has dropped 7.4% to $1.07, drilling fluids company Imdex has dived 9% to 71 cents, crane leaser Boom Logistics has tumbled 12.2% to 7.9 cents and heavy earthmovement equipment company Emeco has declined another 6.7% to 28 cents on top of a 20% crash yesterday.
UBS, which downgraded Emeco to "neutral" from "buy" today, believes that harsh competition and the lack of demand from miners will create a difficult environment for these companies for the foreseeable future, lowering utilisation and cutting margins.
Deutsche Bank also downgraded the stock to "hold" from "buy". "We feel that the risks of further deterioration are high, with conditions likely to worsen before any eventual improvement," the bank said.
CIMB Securities agreed, stating that "with utilisation at low levels, the market increasingly competitive for a smaller opportunity and major miners continuing to be frugal on costs, we believe the current environment will prevail into the medium term."