Shares in BAE Systems (LON:BA) have fallen into the red, extending the previous session’s losses, as JPMorgan Cazenove lowered its stance on the shares, arguing that the British defence contractor is lagging peers. The comments came after the blue-chip group updated investors on its full-year performance yesterday, flagging flat earnings in the current year.
As of 14:23 GMT, BAE Systems’ share price had given up 4.32 percent to stand at 559.70p. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index having lost 0.19 percent to 7,238.63 points so far in today’s session.
BAE seen lagging peers
JPMorgan Cazenove lowered its rating on BAE Systems to ‘underweight’ today, trimming its price target on the shares from 555p to 550p. The move came after the group said yesterday that it expected its underlying earnings per share for 2018 to be in line with its full-year underlying earnings per share in 2017 of 42.1p.
“BAE’s lacklustre guidance for 2018 EBITA and FCF (free cash flow) suggests that, for the foreseeable future at least, it will continue to underperform its peers in US defence and in European civil aero,” the broker’s analyst David Perry commented, as quoted by Proactive Investors, adding that while the group’s US portfolio can grow over five percent per year for several years, the British company’s sales at home looked flat at best, and that export sales were unpredictable by nature.
“Many of BAE’s peers are currently making major strategic acquisitions and we fear BAE will fall further behind these peers.” The analyst pointed out.
Other analysts on group
Citigroup meanwhile remains bullish on the British defence contractor, having reiterated its ‘buy’ stance on the shares today, with a price target of 720p. According to MarketBeat, BAE Systems currently has a consensus ‘hold’ rating and an average price target of 639.92p.