(Sharecast News) – Bank of America Merrill Lynch reiterated its ‘buy’ rating on Babcock International on Thursday while trimming its price target.
BofA said the London-listed defence contractor had reported “solid” first-half numbers earlier this week.
It continued: “The first-half results have de-risked the 2024 full-year guidance and to us, the focus shifts to [February’s] capital markets day, in which we expect to learn more about the mid-term margin trajectory, growth levers and capital allocation.
“We decrease our 2024-26 full-year estimated operating profit…due to lower revenue drop through in nuclear, and weaker-than-expected outlook in aviation.
“The price objective goes to 565p – previously 585p. We reiterate our ‘buy’ rating on attractive valuation, margin expansion and capital allocation optionality.”
Babcock also announced this week it was reinstating its dividend after a four-year absence, following a successful turnaround plan and higher military spending.
BofA said it expected Babcock to increase dividends progressively and is forecasting around 13p per share by the 2026 full year.
