Barclays says Melrose Industries down but not out, stays at 'overweight'

Analysts at Barclays lowered their estimates for Melrose Industries but kept their recommendation for the shares, telling clients that a recovery in its automobile segment in 2021 might result in "upside surprises".

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General Industrials

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Melrose Industries

484.70p

15:45 15/11/24

-3.56%

-17.90p

Following the turnaround specialist's trading update the day before, Barclays cut its forecast for 2020 earnings before interest, taxes and amortisation at the aerospace unit by 46% to £199m with a 26:74 split between the two halves of the year.

Furthermore, the anticipated return to profit in 2021 was expected to be underpinned by cost savings while year-on-year top-line growth was expected to remain "minimal".

For the company's automotive and powder metallurgical arm on the other hand, Barclays estimated that organic sales were set to rise 11% in 2021.

Cost out actions were expected to support the bottom line further, so that 2021 group EBITA was seen down by a more modest 11% to £592m.

Most important however, the broker's analysts said that their base GLVP growth forecast of 16% for 2021 meant that there was scope for upside surprises.

Barclays kept its recommendation on Melrose Industries's shares at 'overweight' with a target price of 155.0p.