Industrial chain and gear box maker Renold (RNO) gains 9.3% to 44.25p despite reporting a 2.3% fall in revenues and 0.2% drop in order intake for the six months to 30 September.

The apparent disconnect can be explained by the ongoing turnaround story at the £98 million cap. Full-year results for the year to 31 March 2014 are now expected to be substantially ahead of expectations thanks to the cost-cutting efforts of its new management team.

Chief executive officer Robert Purcell took the reins at the 148-year-old Manchester business in May following three material profit warnings in a matter of months. His arrival and the implementation of a strategic review, which reduced costs by £2 million in the first half, have had a dramatic impact on a share price which has more than doubled in the last six months.

Investors need to decide if the recovery story has further to run. In response to today's trading update finnCap analyst David Buxton increases his earnings per share estimate for March 2014 by 32% to 2.9p and for the following year by 20.6% to 4.1p, implying a price to earnings ratio of 15.3 falling to 10.8.

Among the actions taken to reduce costs is the closure of its Bredbury factory near Stockport which Buxton estimates could reduce overheads by £2.8 million in the March 2015 financial year. Off the back of his upgraded forecasts he reiterates his 'buy' stance and ups his price target from 41p to 49p. He concludes: 'The shares have been very strong performers, partly a factor of the Bredbury restructuring and also recent director share purchases. With raised numbers, the buy case looks reinvigorated.'

Issue Date: 22 Oct 2013