Meggitt guidance upgrade a 'turning point' for Berenberg
Last week's full-year guidance upgrade over at Meggitt was seen as a "turning point" for the aerospace and defence firm by analysts over at Berenberg.
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Berenberg said the raised guidance brought about a significant change to the Meggitt investment case as forecast momentum had finally turned positive after five years of "uninspiring" financial performance.
Importantly, Berenberg pointed out that Meggitt's upgrade was driven by a combination of factors including strengthened end-markets improved operating performance and reduced business risk - a set of favourable trends the broker believes will continue, translating to a profile of sustained growth with upside potential as operating headwinds fade.
"Over time, we expect investors will be willing to pay higher multiples for consistent growth and positive momentum," Berenberg noted.
Following good growth across its civil aftermarket, military and energy market segments, Meggitt now expects total organic revenue growth in 2018 of 4% to 6%, up from previous guidance of 2% to 4%.
Meanwhile, a slower-than-expected recovery at the company’s polymers and composites business in the first half means it now expects operating margins to be towards the lower end of the guidance range of 17.7% to 18.0%.
Berenberg opted to raise its price target on Meggitt from 510p to 610p and upgrade its rating from 'hold' to 'buy'.