Berenberg downgrades Cobham on end-market headwinds

Berenberg downgraded Cobham to ‘sell’ from ‘hold’ and cut the price target to 260p from 300p.

The bank pointed to persistent end-market headwinds, a stretched balance sheet and slower-than-anticipated working capital improvement.

Berenberg said that following the company’s third quarter trading update and after revisiting trends in its end markets, it assumes only 1% organic growth next year.

Berenberg noted slower-than-expected recovery of short-cycle products in end-markets such as Marine SATCOM and oil and gas, and lower demand in the fly-in fly-out business in the Aviation Services division.

It added that the oil price remains low and we are yet to see a recovery in the mining environment.

It cut its full year 2015/16/17 earnings per share estimates by 2% year-on-year to reflect persisting headwinds in Marine SATCOM and Aviation Services.

This generates flat earnings growth in 2016, partly affected by a 4% dilution from the Composites divestment, Berenberg said.

At 1054 GMT, shares in the aerospace and defence group were down 1.7% to 288.60p.