Broker snap: Babcock is in a good position, say analysts

2nd Oct 2012 10:57

The majority of brokerages hailed engineering group Babcock International's first-half trading update as 'in line' on Tuesday, maintaining their upbeat views on the stock.Jefferies reiterated its 'buy' recommendation and 970p target price for Babcock, saying that the business is "holding a steady course".The broker said that the language used in the statement was consistent with the July IMS: markets remain "buoyant", trading is "positive" and the group is confident of hitting full-year targets."While the bid pipeline remains at £13bn, more opportunities are emerging at tracking stage including equipment support and training for the MOD. Babcock is a major beneficiary of MOD outsourcing and nuclear decommissioning, and we believe a return to 10%+ organic revenue is possible," Jefferies said.Seymour Pierce maintained its 'buy' rating and 950p target price for the stock, saying that today's trading update is consistent with its current assumptions."We believe the need to significantly reduce the defence budget, without any significant scope to further reduce capability, will inevitably lead to more outsourcing to proven operators like Babcock," said analyst Kevin Lapwood.Even though the shares have outperformed the market by over 26% over the last 12 months, Seymour Pierce reckons that they will continue to outperform. Investec raised its target price for the share from 970p to 1,000p and kept its 'buy' rating, saying that company remains "extremely well positioned" and is a "momentum play".However, Panmure Gordon retained a 'hold' recommendation and 940p on the stock today.While the broker also highlighted the group is well positioned longer term, analyst Mike Allen said that the shares "look up with events for now an require earnings upgrades to drive further share price progress from here".By 10:56, shares were trading 3.41% higher at 954p.BC