Broker snap: Meggitt set to fly

30th Nov 2010 13:06

Nomura Securities has upped its target price for Meggitt as the airplane components maker looks set to see strong top-line growth from the upswing in the commercial aerospace cycle while further cost savings should expand margins."We think the recent market pullback is a good opportunity to buy into some of the mid-cycle commercial aftermarket names that should see good earnings momentum over the next few quarters and, Meggitt, with best-in-class operating margins and free cash flow generation, remains a top pick," said Nomura analyst Jason Adams.In the broker's view Meggitt offers strong earnings momentum at a reasonable price. The broker is 5% ahead of consensus on the forecast for earnings per share (EPS) for the current financial year, and believes the market is underestimating Meggitt's growth prospects in the second half of the year.In the medium term, Nomura is projecting a compound annual growth rate in EPS of 8.55 over the next five years. "In our view, earnings risk remains biased to the upside."Following an 3% upward adjustment to its earnings estimates Nomura has lifted the price target for Meggitt from 350p to 370p, and has reiterated its "buy" recommendation.