BofA trims Babcock price target, reiterates 'buy' rating

Bank of America Merrill Lynch reiterated its ‘buy’ rating on Babcock International on Thursday while trimming its price target.

BofA said the London-listed defence contractor had reported "solid" first-half numbers earlier this week.

It continued: "The first-half results have de-risked the 2024 full-year guidance and to us, the focus shifts to [February’s] capital markets day, in which we expect to learn more about the mid-term margin trajectory, growth levers and capital allocation.

"We decrease our 2024-26 full-year estimated operating profit…due to lower revenue drop through in nuclear, and weaker-than-expected outlook in aviation.

"The price objective goes to 565p - previously 585p. We reiterate our ‘buy’ rating on attractive valuation, margin expansion and capital allocation optionality."

Babcock also announced this week it was reinstating its dividend after a four-year absence, following a successful turnaround plan and higher military spending.

BofA said it expected Babcock to increase dividends progressively and is forecasting around 13p per share by the 2026 full year.