FTSE 250 shares round-up: three star stocks lose momentum

“Outstanding” Softcat (LSE:SCT) results, an earnings upgrade by discoverIE Group (LSE:DSCV) and the new targets of Keller Group (LSE:KLR) today failed to trigger fresh advances for three of the strongest mid-cap shares since the Iran war.

The FTSE 250 shares of IT reseller Softcat and ground engineer Keller rose by 30% and 100% respectively in the first three quarters of 2026, including post-war gains of about 65%.

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Their momentum has stalled in the current quarter, with Softcat down by 131p at 1,793p following today’s annual results and by 9% since its 17 September announcement of a major US acquisition and accompanying 1,890p-a-share City fundraising.

Keller, meanwhile, is down by 5% this quarter, including a fall of 96p to 3,168p after telling investors at its capital markets day that it had strong foundations for sustainable growth.

The customised electronics firm discoverIE posted the best performance of the trio, albeit limited to a rise of 14p to 894p. The shares are at a three-year high, having rallied by 39% in the first three quarters of the year and by 27% when covering the Iran war.

House broker Peel Hunt has a price target of 1,000p after responding to today’s half-year update with a 3% uplift to its revenues and earnings per share forecasts for 2026-27.

The group, whose customers span sectors including renewable energy, industrial automation and medical devices, said organic sales growth of 8% included an acceleration in the second quarter performance to 10%.

With group orders up 22%, discoverIE added that full-year adjusted earnings were running ahead of board expectations and that it is well placed to build on its long-term track record of compounding growth through the cycle.

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It has acquired more than 30 specialised electronic design and manufacturing businesses since 2011 and has said previously it sees many opportunities to grow in a highly fragmented market.

Keller shares have surged 280% since February 2024 after a turnaround in its performance culminated in August’s 57% jump in its interim dividend and record order book of £1.9 billion.

The group has benefited from record volume and profit growth in North America, where it has seen significant demand for infrastructure and data centre projects. A half-year operating margin of 7.3% compared with 3.2% at the same stage of the 2022 year and 4.6% in 2023.

Today’s capital markets day set out new medium-term targets, including an operating profit margin of about 7% and compound organic revenues growth of between 5% and 7%.

It expects to generate free cash flow of £800 million in the period to 2030, with dividend cover unchanged at between 2.5 and 3.5 times earnings.

Today’s softening of Softcat shares left its market valuation below £4 billion, which is a setback to its chances of following Computacenter (LSE:CCC) into the FTSE 100 index.

Softcat is the UK’s largest valued-added reseller and provides commercial and public sector organisations with support for their digital infrastructure through collaborations with more than 400 technology vendors including Microsoft and IBM.

As AI becomes more deeply embedded in the applications used by organisations on a daily basis, this has placed greater demands on the infrastructure layer where Softcat’s offering is focused.

Chief executive Graham Charlton said: “The market remains in the early stages of this adoption cycle, and we are very well positioned to benefit given the breadth and depth of our offering, the scale and diversity of our customer base, and our trusted adviser status with both customers and vendors.”

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The shares came under pressure even though results for the year to 31 July were in line with the guidance given at the time of last month’s acquisition of US-based GDT.

Gross invoiced income rose 30.5% to £4.7 billion and underlying operating profit lifted by 19.4% to £215.1 million. A final dividend of 21.6p is payable on 21 December and has boosted the total for the year by 7.5% to 31.5p.

Softcat said: “These results reflect another outstanding performance and further significant strategic progress underpinned by continued investment to support future growth.

Looking ahead, the company expects to deliver high single-digit underlying operating profit growth in the current year.

Broker Peel Hunt reiterated its Buy stance and 2,447p price target following today’s results.

It pointed out that spending across AI, AI-readiness and core IT continues to rise, while pricing and governance complexity is worsening: “All this makes customers and vendors lean more on Softcat, yielding an expanded opportunity.”