FTSE 100 movers: Melrose surges on JPM note

London’s FTSE 100 was down 0.4% at 8,256.94 in afternoon trade on Tuesday.

Melrose Industries was the top gainer on the index as JPMorgan Cazenove hiked its price target on the shares to 850p from 650p and placed them on "positive catalyst watch" ahead of full-year results in March.

JPM said its analysis points to the Aero Engine (AE) industry being highly attractive for investors.

"It is also a challenging industry to understand with many different business models, quite complex accounting, and high investment required to generate attractive long-term returns," it said.

JPM said this can lead to periods when the share price of an AE company significantly undervalues its true "intrinsic value".

It noted that in recent years, this has been the case with Rolls-Royce, MTU and General Electric.

"We think that Melrose is significantly undervalued," JPM said. "We place Melrose on Positive Catalyst Watch ahead of its FY24 results on March 6th 2025, when it plans to provide new medium-term guidance."

JPM said it sees 2025-30 as “something of a golden age” as AE companies benefit from aftermarket profits on the new generation engines they developed and sold over the last 15 years or so.

The bank also said it expects free cash flow to meaningfully improve in 2026-30.

"FCF in 2024-25 is depressed but we expect a material improvement in 2026-30 driven by: rising profits; the end of restructuring; the end of the GTF engine recall; and improving cash flows from a maturing RRSP portfolio," it said.

Intertek was also in the black as the testing laboratories company upgraded annual guidance as it reported a 6.6% jump in like-for-like revenue for the four months to 30 October.

Sales for the period came in at £1.1bn.

"In 2024, we are increasing our full year guidance and now expect our consumer products division to deliver high-single digit like-for-like revenue growth at constant currency," the company said in a trading statement.

FTSE 100 - Risers

Melrose Industries (MRO) 559.80p 6.18%
Intertek Group (ITRK) 4,682.00p 3.77%
Imperial Brands (IMB) 2,598.00p 1.33%
BT Group (BT.A) 156.85p 1.23%
Airtel Africa (AAF) 100.30p 1.21%
Smith (DS) (SMDS) 598.50p 1.18%
Sage Group (SGE) 1,309.50p 1.12%
Flutter Entertainment (DI) (FLTR) 22,070.00p 1.10%
Entain (ENT) 805.20p 1.05%
Fresnillo (FRES) 639.00p 0.95%

FTSE 100 - Fallers

Intermediate Capital Group (ICG) 2,066.00p -2.91%
Marks & Spencer Group (MKS) 370.50p -2.29%
Rolls-Royce Holdings (RR.) 531.80p -1.99%
Beazley (BEZ) 769.00p -1.91%
Halma (HLMA) 2,713.00p -1.77%
Experian (EXPN) 3,771.00p -1.64%
Weir Group (WEIR) 2,182.00p -1.62%
Kingfisher (KGF) 252.00p -1.49%
Lloyds Banking Group (LLOY) 53.86p -1.46%
JD Sports Fashion (JD.) 101.35p -1.41%