MIDAS SHARE TIPS UPDATE: For those wanting something cheaper in the defence sector, engineering group Babcock is not without its fans
For those wanting something cheaper in the defence sector, engineering group Babcock is not without its fans.
The company said six days ago that it would post a loss this year due to Covid-19 problems, restructuring costs and pension provisions, but did state trading was in line with expectations and added it expected savings in this financial year from restructuring to be about £20million.
Babcock makes and supports nuclear submarines, but also works in civil industry, decommissioning nuclear power and supporting generation.
Choppy time: Midas tipped Babcock shares at £5.96 back in 2010
That means it may benefit from increased interest in nuclear power due to energy transition issues and gas supply concerns, as well as increased defence spending and a rerating of defence stocks as ESG issues with the sector fade.
The shares, on a price earnings ratio of just nine, are far cheaper than Chemring, above, partly because of the pensions and reconstruction issues.
Midas verdict: Babcock has had a choppy time in recent years. Midas tipped the shares at £5.96 back in 2010, and shareholders would have done well to sell out in 2013 after that, when they topped £12. At £3.07 this week, they’re worth looking at again. JPMorgan has just raised its price target on the stock to £4.60 from £4. Buy.
Traded on: Main market Ticker: BAB Contact: babcockinternational.com or 020 7355 5300