Broker snap: UBS downgrades Meggitt to sell

23rd Nov 2011 10:10

UBS has downgraded Meggitt from neutral to sell after cutting back its earnings forecasts for this year and the next.The firm, which describes itself as an engineering group specialising in "extreme environment components and smart sub-systems for aerospace, defence and energy markets", released its third quarter statement last week saying that trading continues to be in line with expectations.UBS raises its 2011 sales forecast by 3% to £1,458m. However, "as this is driven by low margin original equipment (OE) business, our earnings before interest, tax and amortisation (EBITA) forecast comes down 3% to £358m from £370m," the broker said.Furthermore, due to a £16m hit from transaction hedge rates worsening for the Swiss business and a £13m reduction due to higher OE mix expected to feed through to 2012, next year's EBITA estimate is scaled back by 7%."Meggitt has also outperformed the European aftermarket stocks by 12% over the last three months and is within 7% of its all time high. Meggitt is on the UBS M&A watch list," the broker said.The target price was cut from 340p to 330p.Shares were trading 2.63% lower at 362.5p by 10:00 on Wednesday.BC