Berenberg downgrades Ultra Electronics ahead of 'another year of decline'
Berenberg cut its rating on Ultra Electronics to ‘sell’ from ‘hold’ while reducing the target price to 1,600p from 1,900p following a capital markets day on 24 June.
Aerospace and Defence
10,849.11
16:59 26/04/24
FTSE 250
19,824.16
16:59 26/04/24
FTSE 350
4,470.09
16:59 26/04/24
FTSE All-Share
4,423.59
17:14 26/04/24
Ultra Electronics Holdings
3,500.00p
17:09 29/07/22
The bank said Ultra has not delivered organic growth since 2011 and the outlook remains muted in 2015 due to continuing pressures in the group’s core defence markets.
Until the pattern of negative earnings momentum is reversed, it said, Ultra will struggle to regain its historical premium rating, which is now slightly discounted compared with the UK defence sector on a price-to-earnings basis.
Berenberg said Ultra tends to supply shorter-cycle products that have been disproportionately affected by pressures within the defence procurement system.
It said ongoing cost reductions will protect margins and better position the group for a recovery, but this will take time and 2015 may be another year of organic decline.
At 13:00, shares were down 1.2% at 1,781p.