Broker snap: Jefferies ups forecasts for Babcock

15th May 2012 11:10

Jefferies has maintained its buy recommendation and hiked its target price for engineering support services Babcock after the firm's strong full-year results and bullish outlook statement this morning.Earnings per share (EPS) for the year to the end of March were 4% ahead of consensus estimates on a fully diluted basis, driven mainly by strong EBITA (earnings before interest, tax and amortisation) margins. Meanwhile, the 5.6% organic revenue growth rate was in line with expectations.Jefferies says that the Support Services division was the standout performer in the 2011/12 fiscal year, with second-half organic revenue growth of 8% beating the broker's 6% estimate.Babcock said that it expects to make "further strong progress" in the 2012/13 fiscal year and earnings should be ahead of previous guidance. Jefferies has raised its EPS estimates for the years ending 2013 and 2014 by 6% (9% on an underlying basis) and has, in turn, lifted its target price for the stock from 780p to 910p."Organic revenue growth is accelerating as Babcock rides an attractive outsourcing wave," Jefferies said.BC