Broker snap: UBS downgrades Ultra Electronics to sell

15th Dec 2011 09:34

UBS has downgraded its rating for high-tech defence firm Ultra Electronics from neutral to sell, saying the group is not immune to defence budget cuts.Around half of Ultra's revenues source from the US, the majority of which are with the Department of Defense and other security agencies, UBS said. Therefore, with the US 'supercommittee' failing to reach an agreement, the uncertainty surround defence stocks has increased.The broker speculates that this uncertainty could lead to contract delays hitting sales as early as next year."Ultra's share price trades at over 25% premium to its UK defence peers and does not reflect the increased risk of potential defence cuts, in our view."The target price is cut from 1,500p to 1,250p.Shares were trading 1.59% down at 1,421p by 09:42 on Thursday morning.BC