Broker snap: BarCap upgrades Meggitt to 'overweight'

18th Jan 2013 08:52

Aerospace components engineer Meggitt was a high riser on the FTSE 100 on Friday morning after Barclays Capital upgraded its rating for the stock from 'equal weight' to 'overweight' and raised its target price from 450p to 520p. The broker believes that Meggitt is "forgotten, but not for long", saying that the stock's discount to the sector is "unwarranted".BarCap said that the shares' 20% valuation discount to peers "will close as investors in the aerospace cycle look away from the more expensive pure-play names with original equipment or aftermarket exposure, and seek sector laggards like Meggitt."Previous concerns about defence and business jet exposure are no longer a drag on growth and returns, based on our analysis. We also believe diversified mix stories such as Meggitt and Rockwell Collins in the US are late cycle plays, and we have already seen the latter begin to re-rate."The new target price is based on 14 times forward earnings, in line with the stock's long-run average "which we believe is warranted given our leading returns and broadly similar growth forecasts", the broker said.Shares were up 1.55% at 437.7p by 09:21.BC