Citigroup downgrades BBA Aviation to 'neutral'

BBA Aviation has been downgraded to 'neutral' from 'buy' by Citigroup, with the US bank highlighting recent turbulence in foreign currency markets and a 66% jump in the share price over the past twelve months as reasons to chart a lower flight-path for the stock.

The company released a trading update for the first four months of fiscal year 2017 on Friday, with revenue soaring 19% during the period.

BBA’s numbers were boosted by the performance from its Signature Flight Support section.

Organic revenues at the Signature fixed-base operation unit grew 3% with strong "drop through" continuing to demonstrate market outperformance, BBA said in the update.

However, Citi noted such growth was below the 4% increase in US Business&General Aviation activity, although the broker expected an acceleration to 3.3%, supporting a 13% rise in operating profits.

"The US dollar was a tailwind to BBA's GBP share price in 2016. Similarly, recent FX volatility introduces some turbulence to the share price," Citigroup analysts said.

"Following the 66% rise in share price over the past 12 months, we see our favourable outlook for Signature as now being mostly captured in the current valuation. As such, we downgrade BBA to Neutral."

Citi's target price for BBA Aviation was lowered to 330p from 340p. The firm's shares were trading 4.49% lower at 299.7p as of 11:04 BST.