UBS upgrades Meggitt, recent falls 'overdone'

21st Mar 2014 09:31

UBS has upgraded its rating on aerospace, defence and energy engineer Meggitt from 'neutral' to 'buy', saying that the stock has been disproportionately hit after its recent underperformance."Meggitt is down 11% relative the FTSE 100 since mid-February, despite only a [small] FX-driven [earnings] downgrade" said Analyst Charles Armitage."The stock is now trading at the bottom of the range of its commercial peers (both OE and aftermarket oriented, but especially versus its aftermarket peers), which we believe is overdone on both relative and absolute basis and the stock offers good value at these levels."Armitage believes that Meggitt can sustain long-term profit growth at around 6%, helped mainly by the commercial aftermarket and the high-growth energy sector.The bank has slightly lowered its 2014 forecasts by 1% to adjust for changes in the Swiss franc/dollar exchange rate, leading to a small fall in the target price from 530p to 520p.The stock was up 1.62% at 477.1p by 09:38 on Friday.BC