This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Trade Parameters
Technical Observations – For
Technical Observations – Against
Shares consolidating around twin support: rising lows dating back to April 2018 and horizontal support since October 2017. Markets appear to have already digested Half-Year results from 7 August and ready to resume the multi-month uptrend. Recent FY guidance upgrade positive for shares and broker Berenberg seeing company’s free cash flow almost doubling by 2020 (9 July).
Long-term outlook for defence spending in the United States, the company’s most important market, is positive with US President Trump boosting defence budget by $160bn over the next 2 years. Meggitt recently awarded a $21m 5-year fuel cell contract for US military’s UH-60 Black Hawk helicopters, and overall order book grew 24% since H1 2017,
Key risks to Meggitt shares include economic uncertainty that creates pretext for fiscal tightening and lower defence expenditure. Company operates globally and has significant exposure to FX headwinds. Poor trading update ahead of FY results could also hurt shares.
Brokers are positively biased toward Meggitt, with a healthy 89% of analysts suggesting either “Buy” or “Hold” strategies, with only two brokerages saying “Sell”. Bullish attitude extends to analysts’ outlook toward the company’s share price, with an impressive 85% of brokers seeing an upside from current share price levels. The average target price of 569p is close our short-term goal of revisiting August highs. Recent broker updates are increasingly more bullish, with Jefferies (20 August) suggesting “Buy” and a 635p target price.
Next Event: Ex-dividend, 6 Sep; Trading update, 13 Nov
Latest Broker 12-Month Consensus: 39% Buy, 50% Hold, 11% Sell (full breakdown on request)
Source: DowJones Newswires, Reuters News, Bloomberg or Company Press releases
| Share | 1wk | 1m | 3m | 6m | 1yr | 2yr | 3yr | 4yr | 5yr |
| Perf % | -0.2 | -6.4 | 6.4 | 10.9 | 6.4 | 14.9 | 12.4 | 13.4 | -1.7 |
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Prepared by Michael van Dulken, Head of Research