Exane downgrades Cobham after H1 results

Exane BNP Paribas downgraded Cobham to ‘underperform’ from ‘neutral’ and cut the price target to 140p from 143p, highlighting lingering doubts following the company’s first-half results last week.

The bank said sales and trading profit in H1 were broadly in line with consensus.

“Cobham will continue to face difficulties in H2 and the H1 results did not inspire more confidence,” it said.

Exane said that despite something of a recovery in the last three months, the stock has underperformed the sector by around 32% year to date, making it the weakest performer in its coverage.

“After the stock’s bounce in the last three months, Cobham trades at a valuation premium versus other defence companies and looks unattractive versus more resilient defence plays (BAE Systems) or more compelling civil value cases (Airbus Group, Dassault Aviation).”

The FTSE 250 aerospace and defence group is struggling in military activities, especially its CAES division, which suffers from technical and supplier quality issues, but also from the end of production on certain mature programmes, Exane said.

“Cobham is likely to struggle to generate organic growth in 2016e and perhaps even in 2017e. We do not expect organic growth and margin to recover until 2018e.”

At 0918 BST, Cobham shares were down 1.3% to 159.70p.