Babcock lifted by Liberum upgrade
Engineering support and outsourcing company Babcock got a boost on Wednesday as Liberum upgraded its stance on the stock to ‘buy’ from ‘hold’, maintaining its 960p price target.
Babcock International Group
499.40p
10:44 19/04/24
FTSE 100
7,835.10
10:45 19/04/24
FTSE 350
4,309.04
10:45 19/04/24
FTSE All-Share
4,265.32
10:45 19/04/24
Support Services
10,357.26
10:45 19/04/24
The brokerage attributed the upgrade to the fall in the share price and attractive metrics relative to the peer group.
In addition, it noted the business should deliver 6-7% revenue growth in 2018, which makes it too cheap to ignore.
The brokerage said the company trading statement in February guided to an in-line performance. It expects total group revenue of £5.1bn in FY17 versus £4.8bn in FY16 at a steady margin of 11.4% compared to 11.1%.
Liberum forecasts total profit of £576m in FY17 versus £540m and maintains its estimate for FY17 underlying earnings per share of 80.2p compared to 74.3p. It reckons the dividend will be upped by 8.1% to 27.9p.
The brokerage noted that at the seminar, management re-iterated overall guidance of 6-7% organic revenue growth, and it expects that around 1.5% growth will come from the contracts on the Met Police, Qantas and FOMEDEC (French aircraft training).
“We believe that this growth is achievable and makes Babcock stand out in a market bereft of growth.”
Liberum added that issues around earnings quality, Ministry of Defence pressures, pension, Avincis, and O&G exposure are now well understood.
At 0900 GMT, the shares were up 1% to 903p.