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
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