Cobham approaching 'turning point', says Berenberg

Analysts at Berenberg upgraded technology and services innovator Cobham to 'buy' on Thursday, noting that a "turning point" in the aerospace and defence outfit's complex history was fast approaching.

Berenberg said the recent capital markets day was "significant", in its view, given Cobham's new management team appeared compelled to focus its message on business opportunities, rather than business improvements.

"We are under no illusion there is still much to do to improve operations and execution, and the shadow of the Boeing KC-46 contract will weigh on the shares until there is more clarity," analysts wrote.

However, the analysts believe 2018 will be the year earnings and cash flow through, and with the support of a strong balance sheet, the broker expects evidence of recovery to become "increasingly apparent through 2019".

The business outlook has also improved, with orders up 25% at the half-year, and said it now anticipates earnings and cash will return to growth in 2019 as operational improvements come through and provision payments phase out.

Despite Cobham shares now 25% off their August high and the group's risk/reward case seen as "much more favourable", Berenberg's target price was cut to 124p from 140p standing in order to reflect current peer multiples.