Ultra Electronics slumps on Kepler downgrade
Ultra Electronics tumbled on Tuesday as Kepler Cheuvreux downgraded its stance on the stock to 'hold' from 'buy' saying there is limited upside pending the chief executive officer's review.
Aerospace and Defence
10,798.84
16:59 23/04/24
FTSE 250
19,799.72
16:59 23/04/24
FTSE 350
4,424.29
16:59 23/04/24
FTSE All-Share
4,378.75
17:14 23/04/24
Ultra Electronics Holdings
3,500.00p
17:09 29/07/22
The broker, which upped its price target to 1,720p from 1,650p as it assumes higher organic growth but lower free cash flow conversion, said first-half results on Monday were mixed but validated the view that organic growth will resume.
"Free cash flow, however, appears to be under some pressure, as capex and working capital could rise," it said.
Kepler added that the order book up 19% organically and sales growth of 1.3% are positive indicators that Ultra is finally returning to organic growth, six years after having entered an unprecedented period of organic decline.
CEO Simon Price is due to present his strategic review in March next year and Kepler said it expects additional cost reduction efforts and improved process implementation across the organisation to improve execution.
"We also see higher investments in core skills and capabilities. Improved discipline in M&A criteria is anticipated, as recent M&A has not delivered in line with plans," it said.
At 1415 BST, the shares were down 7.2% to 1,576p.