GKN shares fall on Citi downgrade

GKN shares fell on Wednesday as Citi downgraded the stock to ‘neutral’ from ‘buy’ and left its target price unchanged at 315p after the company reported a first half trading update.

The maker of parts for automotive and aerospace sectors on Tuesday said pre-tax profit fell 14% to £182m in the six months ended 30 June, on sales of £4.24bn, up 17% from the same period last year.

Earnings per share fell 4% to 9.5p but the company lifted its interim dividend to 2.95p per share from 2.90p. Operating profit increased 13% to £390m.

The company said it expects 2016 to be “another year of growth”, helped by currency translation and Fokker Technologies, a division of its Aerospace business.

GKN Aerospace's 2016 organic sales are expected to be slightly up on last year, driven by Fokker. The group added that fixed cost reductions of £30m will benefit 2017.

“GKN beat consensus expectations for trading profit by 7%, with an improved 2016 outlook for Aerospace and signs that the pace of decline in Land Systems is now slowing,” said Citi.

“While newly announced cost savings (in addition to the previously announced synergies from Fokker) should support earnings into 2017, we have lowered our mid-term (2017-2019) growth outlook in Aerospace to 3% on wide-body growth uncertainty, which combined with a higher pension deficit leaves our target price unchanged at 315p.”

Shares dropped 1.66% to 296p at 1015 BST.