Investec has trimmed its target price for engineering group GKN after its Driveline division suffered from a worse-than-expected weakening in automotive demand and associated operational issues.

Revenue in the third quarter came in at £1,608m compared with Investec's £1,637m estimate, while the 7.1% missed the 8.2% forecast, mainly due to Driveline.

"Weakening demand in European automotive markets and fluctuating demand in India (OEM strike) and Japan (OEM product weakness). Also, seasonality in Getrag (acquired in 2011) was greater than expected," the broker said.

Investec said that it is thinking about cutting its full-year profit figures by around 5-6% to reflect ongoing weakness in automotive which implies an operating profit of around £530-540m, compared with the current £567m estimate.

Investec has maintained its 'hold' rating for GKN and reduced its target price from 240p to 224p.

However, analysts at Jefferies chose to retain their 'buy' rating on the stock this morning.

The broker said: "The 3Q12 IMS testifies to the challenging market backdrop and to GKN's relative strengths, allowing for seasonality, in our view. There was still, for example, good organic growth in Driveline and Powder Metallurgy.

"The market may yet weaken further, but we see a good chance that Aerospace will steady group earnings in FY13. We believe the subsequent re-rating of GKN could be significant."

By 10:12, shares were down 3.63% at 204.2p.

BC

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