Babcock shoots higher as JPMorgan lifts price target, EPS estimates

Babcock shot higher on Thursday as JPMorgan Cazenove lifted its price target on the shares to 630p from 610p and upped its earnings per share estimates following the company’s capital markets day.

JPM increased YE March 2024-27 earnings per shares estimates by around 3% per annum, leaving it 6%/11%/11%/8% above Bloomberg median consensus in these four years.

The bank said its higher forecasts are driven by three takeaways from the CMD.

Firstly, the scope of infrastructure work in Babcock’s Devonport dockyard is greater than it expected.

Secondly, it pointed to the fact that Babcock has around £100m of incremental revenue from building military land vehicles, and thirdly, it noted the "overall positive tone" of the presentations.

JPM, which rates Babcock at ‘overweight’, said it thinks the 9% decline in the share price was a "very strange" reaction to the CMD, leaving Babcock "meaningfully" undervalued versus European defence peers and providing "a very attractive" entry point for investors.

At 0845 GMT, the shares were up 6.2% at 450.60p.