Broker tips: Babcock, MJ Gleeson
By Iain Gilbert
Date: Wednesday 04 Jun 2025
(Sharecast News) - JPMorgan Cazenove placed Babcock shares on 'positive catalyst watch' on Wednesday ahead of results on 25 June.
The bank said there is a good chance that Babcock sets new medium-term financial guidance with these results.
In addition, it said it sees Babcock "as one of the big winners" in the UK Strategic Defence Review (SDR) that was published on Monday.
"BAB should be able to highlight the opportunities from the SDR in its upcoming results meeting," it said.
"Our multiples-based Dec-26 price target of 1,280p implies circa 25% upside potential over the next 18 months."
JPM also noted that its YE March 25-27 estimated EPS is 7%/6%/5% above Vuma consensus.
It added that overweight-rated Babcock is one of the cheapest European defence stocks that it covers.
RBC Capital Markets downgraded MJ Gleeson and slashed its price target on the stock on Wednesday after the housebuilder's profit warning.
"Gleeson issued an unscheduled trading update this morning reducing profit expectations for the year ending 30 June 2025 and 30 June 2026," it noted. "We have reduced our estimates to reflect lower gross margins, and lower volumes from FY26-27E. We reduce our implied price target from 650.0p to 425.0p, and downgrade our rating from 'sector perform' to 'underperform'."
The Canadian bank cut its operating profit estimates by 17%, 15% and 16% in FY25E, FY26E and FY27E, respectively, reflecting lower gross margin estimates and lower volumes.
"In our view, today's reset painted a picture of ongoing challenges rather than drawing a line under a specific issue. Planning delays hurt smaller housebuilders the most as a small number of delays can have a large impact on financial performance. We are also wary about Gleeson using bulk deals to grow volumes at a time when bulk buyers have a lot of buying power - surely Gleeson's affordable price point negates the need for bulk deals," said RBC.
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