Thursday newspaper tips round-up: Meggitt, Next

Civil aerospace accounts for around half of Meggitt´s sales. So bulging order books at Airbus and Boeing - which are indicative of a buoyant long-term outlook for the sector - is good news. However, the after-sales market is volatile,as many old aircraft are being taken out of service. The hit to the company´s sales in that segment, revealed in yesterday´s figures, wiped a fifth off the company´s stock price. To take note of, margins on parts for older planes are very generous, compoduning the negative effect. Furthermore, the drag from that malaise could last into next year.

It all comes at a bad time for the engineering group, as the civilian markets was suppossed to offset weakness in defense as activity in Afghanistan winds down. Worse, Meggitt´s business model of selling new kit at a scant profit in the hope of making it up with future arftermaker sales is now in question, says the Financial Times´s Lex column.

Next reported healthy 6% rise in full price sales over the three months to 29 October. This bellwether for the British high street upped the lower part of its guidance range for full-year pre-tax profit forecasts to between between £810m and £845m, a good sign heading into the vital Christmas period.

Over the years, the firm´s entrenched management team has proven it knows how to run a 'tight ship' and keep the business stable. However, there are worries over the slowdown evident at the Directory business, which analysts consider to be the engine for growth. The number of customers buying on credit has also decreased.

As well, the company´s third quarter trading was propped up by some 'one-offs' related to positive calendar effects. Sales also saw wild swings from one week to the next during the period. Nonetheless, despite that, the outfit has paid hundreds of millions of pounds to shareholders.

Next generated £249m of surplus cash in the first six months. Of that amount, £163m was funneled into a special dividend.

Five years ago the stock was worth £21.62 and yesterday it closed at £79, down 45p. "Buy", says The Times´s Tempus, its a "safe bet as a well-run, cash-generative business."