Meggitt moves higher after buy recommendation

As the FTSE 100 continues to shrug off the tensions between the west and Russia, one of the main risers is industrial group Meggitt.

The aircraft parts maker is up 7.2p to 476.7p after UBS raised its rating from neutral to buy. The bank edged down its 2014 earnings forecasts by 1%, saying it had been too enthusiastic about the prospects for margin recovery in the sensing systems business. This has led to UBS edging down its price target from 530p to 520p, but it said:

Meggitt is down 11% relative the FTSE 100 since mid-February, despite only a circa 2% EBITA and 4% earnings per share...downgrade [driven by foreign exchange]. The stock is now trading at the bottom of the range of its commercial peers (both original equipment and aftermarket oriented, but especially versus its aftermarket peers), which we believe is overdone on both relative and absolute basis and the stock offers good value at these levels.

We believe that Meggitt can sustain around 6% long term profit growth, driven mainly by the commercial aftermarket (largely planes that have already been sold) and the high growth energy sector (where Meggitt's proprietary technology gives them a performance advantage).