Meggitt’s (LON:MGGT) share price has rallied after Barclays reiterated its 'overweight' rating on the company, saying the stock was "too cheap to ignore".
Meggitt plunged to a three-year low last week after revealing that its comparative sales had fallen one percent in the third-quarter, hurt by lower-than-expected sales of aircraft spares, customer program deferrals and a softening market for its energy business. With the weakness set to persist into the fourth quarter, underlying profit for 2015 would now be “meaningfully below” the company-compiled consensus of £369 million, the aerospace and defence engineer warned.
In response to the announcement, several brokers turned negative on Meggitt’s stock, causing a further decline in the group’s share price. Bucking the trend, Barclays analysts Phil Buller and James Zaremba wrote in a note to investors today: "Rarely do we find A&D companies which are simply too cheap, but post last week's warning Meggitt is firmly in that bracket." Buller and Zaremba added they were concerned about the near-term visibility and capital deployment discipline but that these concerns seemed more than factored into the current share price. They lowered Meggitt's price target to 420p from 610p. "In short, we see this as a compelling entry point with limited further downside. 420p price target implies 19% upside," the analysts stated.
Underpinned by the generally positive analyst note, Meggitt’s share price rose over five percent earlier today, climbing to the top of the FTSE 100 leaderboard. As of 15:21 GMT, the blue-chip company was 4.87 percent higher at 374.50p, while the benchmark index was just 0.14 percent up at 6,370.44 points.