Berenberg drops Senior to 'hold' following cuts to growth outlook
Analysts at Berenberg downgraded aerospace and defence firm Senior from 'buy' to 'hold' on Tuesday, saying that the group's wings had been "clipped" after its management lowered their growth outlook.
Aerospace and Defence
10,379.70
14:20 18/04/24
FTSE 250
19,360.83
14:20 18/04/24
FTSE 350
4,324.41
14:20 18/04/24
FTSE All-Share
4,280.59
14:20 18/04/24
Senior
163.00p
14:14 18/04/24
Berenberg said that despite maintaining its 2019 expectations, Senior's recent trading update for the ten months ended 30 October indicated a "significantly lower" sales and margin outlook than it had previously forecast, driven by end-market weakness, customer behaviour and increased competition.
To reflect that, the German broker made significant cuts of roughly 30% to its earnings estimates for 2020 and beyond, and said that it saw only a limited upside to its new forecasts in the near-term, with the potential for further downside should the existing challenges persist.
Berenberg, which also lowered its price target on Senior's shares from 240.0p to 185.0p, noted that on its new estimates the group's shares were trading on a 2021 price-to-earning multiple of 13.0 times, making for a modest discount of less than 10.0% to the pan-European aerospace and defence sector, which it deemed to be "justified" given the company's now lower growth outlook and industrial end-market exposure.
"We see limited material upside to our sales or margin forecasts over the near term, although we acknowledge that the ungrounding of the 737 MAX will likely result in a modest sentiment rally in the shares," said Berenberg.