Citi and RBC upbeat on Melrose after fresh guidance for aerospace

In particular, analyst Martin Wilkie highlighted the upwardly revised medium-term margin target on an earnings-before-interest-and-tax basis for the Aerospace division from 12.0% to 'over 14.0%'.

Wilkie also welcomed the further insights provided into the firm's Revenue and Risk Sharing Partnership portfolio, which he had previously described as a "source of hidden value".

All told, the improved outlook for margins and cash-flow in Aerospace were "major positives, with double-digit % consensus earnings upgrades likely for 2023 and beyond," he said.

Wilkie had a 200.0p target price on the shares.

His peers at RBC Capital Markets were in a similar frame of mind, telling clients that the fresh guidance implied a minimum upside to consensus estimates for Melrose's earnings before interest, taxes and amortisation of 30.0% by 2025 and of over 10% for the group.

"These targets are more positive than we expected, but speaking with the company they indicated a very positive internal outlook," they said.

"Management also suggested that a doubling of shareholder equity should be possible for GKN over time, which would provide significant upside to our current PT."

The RBC analysts stood by their 'outperform' recommendation and 220.0p target price.