Barclays upgrades Meggitt, Senior
Barclays upgraded Meggitt and Senior on Tuesday as it took a look at the European aerospace and defence sector.
The bank lifted Meggitt to ‘overweight’ from ‘underweight’ and hiked the price target to 463p from 233p. Barclays said it likes Meggitt’s aftermarket bias and that with earnings likely to trough in Q420/Q121, investors are now looking past next year.
It pointed to increasing confidence in the longer-term earnings and free cash flow trajectory on vaccine news, and said a de-risked balance sheet lowers the possibility of an equity raise on private placement debt and utilisation of the UK Covid Corporate Financing Facility scheme.
Barclays upgraded Senior to ‘equalweight’ from ‘underweight’ and upped the price target to 77p from 47p.
It noted that Senior is most geared to the 737 MAX recovery and said that following US Federal Aviation Administration approval, sentiment and visibility has started to improve.
"Despite producing below rate, over time fixed cost absorption should improve as volumes return," the bank said. "Although a period of destocking across multiple platforms is expected, and original equipment oversupply creates downside risk on widebody aircrafy production rates (we forecast trough earnings for the Aerospace division in 2021), we think this is now well-reflected in the share price."