Engineering group GKN will have a challenging start to 2013 but has a sound platform for solid growth, according to Jefferies which kept its 'buy' recommendation and 275p target price for the stock.

2012 results reported Tuesday morning came in better than Jefferies' forecasts across the board: group management sales of £6.90bn were ahead of the £6.88bn estimate, while profit before tax (PBT) of £497m was above the £486m prediction.

Jefferies hailed the company's fourth-quarter performance in particular, with Aerospace sales helped by a bigger-than-expected contribution from the Volvo Aero acquisition and a better-than-forecast performance in Driveline. "In 4Q12, we believe all divisions demonstrated encouraging organic growth and satisfactory returns."

As for 2013, the broker acknowledged that expectations still vary widely with company-sourced data showing an estimated sales range of £7.11bn to £7.82bn (Jefferies: £7.44bn) and underlying PBT forecasts ranging from £518m to £605m (Jefferies: £518m).

Jefferies said that this year will see a "challenging start" but the trading backdrop will become more benign, perhaps even positive in the second half - "GKN's progress appears poised to accelerate when the latter occurs".

"In 2013, GKN will have to take the rough with the smooth. We envisage most of the rough in 1H13 and the smooth(er) part in 2H13," Jefferies said.

"There is a sound platform for good future growth, in our view. Against a stable demand backdrop, GKN should make very strong progress, in our view."

Shares were down 0.36% at 251.4p by 10:33, outperforming the wider FTSE 100 which was down 1.22%.

BC

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