Broker snap: 'Hold' Babcock after strong run, say analysts

6th Nov 2012 10:14

Babcock's share price took a hit on Tuesday morning despite the engineering support services group reporting a solid set of broadly 'in-line' first-half numbers. With shares performing extremely well in the year-to-date, analysts believe that the stock is now up with events. Shares have jumped from the 737p level at the start of January to 989p as of yesterday's close, a rise of around 30%.Investec has downgraded its rating on the stock from 'buy' to 'hold' but has maintained its long-term positive stance on the business.Analyst John Lawson said: "Babcock has been one of the best performers in the sector for some time and, whilst today's figures were good, we move from 'buy' to 'hold', mostly a valuation call after a strong run up. "We still believe that it's an attractive business with good underlying organic growth rates, one of the sector's strongest order books, an excellent pipeline of new business opportunities (with the possibility of getting to double-digit organic revenue growth) and defendable margins (due to the high technical content of much of its work)."Investec's target price remains at 1,000p.Panmure Gordon, meanwhile, maintained its 'hold' recommendation and 940p target price for the shares despite Babcock's results coming ahead of its own forecasts across the board."We view these as a strong set of results, but think the shares are up with events in the absence of earnings upgrades this morning," the broker said.Shares were trading 3.69% down at 952.49p in mid-morning trade.BC