JPMorgan downgrades Cobham after results

It noted Cobham’s 2015 earnings per share were around 4% below the bank’s and Bloomberg’s estimates.

“This mainly relates to weakness in COB’s short-cycle commercial end markets, especially oil & gas. 2015 net debt was also £120m higher than our estimate, due to unsold inventory at year end,” it said.

JPM cut its 2016-18 EPS estimates by around 4% to 5% and trimmed the target price on the back of that, higher net debt and a lower target multiple.

“The main investment positive for COB is that we are at an inflection in western defence spending, but there are several new concerns,” it said, noting the company’s big strategic moves have not worked.

In 2008, at the top of the defence cycle, Cobham spent around $1bn on three defence acquisitions. Between 2012 and 2014, it spent around $2bn on several commercial acquisitions to diversify away from defence.

“However, the US/W.European defence market is now turning up, whilst many commercial end markets are in a downturn,” JPM said.

At 0913 GMT, Cobham shares were down 2.5% to 233.70p.