Broker snap: Babcock 'well positioned', Panmure upgrades

16th Jul 2013 11:33

Panmure Gordon has upgraded its rating for engineering support services group Babcock from 'hold' to 'buy' and hiked its target price from 1,050p to 1,350p.In a research report titled 'Sitting pretty', Panmure said: "With a number of positives facing the group against a relatively flat share price performance vs. some of its peers, we believe Babcock is very well positioned at present."The broker said that the company is the best placed out of the outsourcing stocks and should "comfortably" outperform 2015 and 2016 forecast on organic growth as its rapidly growing bid pipeline begins to convert."An ever strengthening balance sheet is also likely to drive M&A upside, with [return on invested capital] at record levels gathering momentum and its pension deficit likely to fall."The new target price equates to 16 times 2016 earnings per share. The broker said: "While this appears rich relative to the sector, we can now see the earnings upgrades materialise over a 12-18 month period hence our positive stance from here."The stock was up 0.42% at 1,188p by 11:41.BC