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(Sharecast News) - Analysts at Citi reinstated their 'neutral' rating on defence group BAE Systems on Friday, updating its forecasts following the company's acquisition of Ball Aerospace.
Citi said over the last couple of years, BAE Systems medium-term outlook has accelerated from low/mid-single digit to mid/high single digit as its pipeline expanded. In addition, Citi expects this growth to be "relatively capital light", resulting in strong cash conversion.
However, the bank said its share price has already largely reflected this and the roughly 10% upside to its new target price of 1,400.0p does not merit a 'buy' recommendation.
"Pushing the scenarios towards the upper end of realistic expectations does give more attractive upside to 1,600.0p but we consider this to be in 'everything has to right' territory; conversely, our downside scenario, which is approaching the realms of the bottom end of realistic expectations, gives fair value of 1,070.0p," said Citi.
Reporting by Iain Gilbert at Sharecast.com
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