Analyst Note| Joachim Kotze |
Wide-moat Meggitt is lowering its guidance for full-year 2021 as the recovery in civil aerospace is more than offset by lower-than-expected defense orders in the U.S., while global supply chain disruptions weigh on the group’s ability to deliver finished products. Revenue for 2021, which was previously guided to be flat year on year, is now expected to decline by 5%. The updated midpoint operating profit guidance of GBP 180 million is lower than 2020 operating profit of GBP 190 million, a deviation from the previously expected year-on-year increase in profitability. The group still expects to generate positive free cash flow for the full year. Meggitt is under an all-cash takeover offer from Parker-Hannifin for GBX 800 per share, which forms the basis of our GBX 800 fair value estimate as we believe the deal is highly likely to succeed.