Babcock shares jump but Liberum says 'hold'

Defence and civil specialist equipment manufacturer Babcock reported an "encouraging" start to the financial year, though that wasn't enough for analyst at Liberum to change their neutral stance on the stock.

The broker reiterated its 'hold' rating and 400p target price, slightly under Thursday morning's level of 405.76p, up 4.5% on the day.

Liberum said the price-to-earnings ratio of 9.8 might look cheap compared to historic multiples but it regards the valuation as "fair value given limited revenue growth hand better opportunities elsewhere".

In an update for the first five months of the year ahead of its annual general meeting, the company hailed good organic revenue growth, an improved operational performance and higher cash flow compared to the same period a year earlier.

Liberum said the statement, which didn't include any financial details, suggests trading was in line with forecasts, with the broker predicting first-half organic revenue growth of around 10% and fully diluted earnings per share (FD EPS) of 19.5p, compared with 6.7p the year before.

"We maintain our FY24 and FY25 FD EPS estimates, noting potential upside if Nuclear Infrastructure continues to track ahead."