Credit Suisse upbeat about Babcock prospects

13th May 2014 10:14

Credit Suisse has initiated coverage of Babcock International with an 'outperform' rating, labelling the company as a 'one-of-a-kind engineering and technical services provider'.The bank has set a target price for the stock at 1,350p, representing around 10% upside from Monday's closing price of 1,225p.The stock is trading a 17.6 times estimated earnings for this year, falling to a multiple of 15.6 on next year's forecasts, which "does not look demanding in terms of the high visibility of [earnings] growth and upside potential from big ticket wins", Credit Suisse said.The bank said that Babcock's core business is in "good shape", while March's £1.6bn acquisition of Avincis makes "strategic and financial sense".Meanwhile, the company is well positioned to capitalise on forthcoming major defence outsourcing bids including Ministry of Defence Logistics and the Army tracked vehicle fleet. These opportunities present "potential upside risks to medium-term forecasts", Credit Suisse said.The stock was 1.2% higher at 1,239.81p by 10:41.BC