Portfolio

QinetiQ upgraded by Barclays after sell-off 'overdone'

By Oliver Haill

Date: Thursday 17 Aug 2017

(ShareCast News) - Barclays has upgraded QinetiQ to 'overweight' after the defence technology firm's shares fell more than 20% after results in May and warned of an order slowdown in July.
Analysts at the bank suggested the balance between risk and reward is now "favourably skewed" towards the shares.

Green shoots have sprouted at QinetiQ's global products division last year for the first time in five years.

"The wash-through of adverse headwinds from largely conflict activity related demand in prior year periods, acquisition benefits and management's optimism regarding growth again in FY18, suggests the division may finally be turning a corner," analysts said in a note.

Cash is looking more comfortable, with net cash of £190m forecast by year end and pension risks better contained.

Management are now able to "take a more liberal view", as demonstrated by the first acquisitions since 2008, with analysts estimating that acquisition spending of £150m at an average of EV/EBITA ratio of around 11 times would add nearly 10% to earnings per share forecasts.

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