|GKN got a boost as Bank of America Merrill Lynch upgraded its stance on the stock to 'buy' from 'neutral' and upped the price target to 365p from 350p.
"As we move into 2017, we believe GKN provides one of the strongest earnings growth profiles in the sector, through both organic improvement and restructuring," Merrill said, adding that the valuation has been weighed on by deteriorating sentiment in aerospace & autos end markets.
However, the bank said the stock's discount to peers has grown too wide and is now attractive. It noted the shares are now trading a 33% discount to the benchmark Stoxx 600 index 12 months forward versus its 10-year average discount of 14%.
"We think this valuation discount is extreme, and is an attractive entry point in the context of the strong earnings growth we expect relative to the rest of the sector."
BofA ML said it sees top-line deceleration but bottom line acceleration. It said organic growth in Aerospace should remain low single digit organic 2017-18, as military improves and civil deteriorates. However, it sees a stronger earnings profit as the company continues to improve profitability on A350XWB and Fokker margins.
"Despite slower IHS' production outlook, Driveline should continue to outperform the market, in our view, and earnings should benefit from the group-wide restructuring programme and non-repeat of exceptional cost."
|Premium content. Can't access the article.|
|- Barclays Capital today reaffirms its overweight investment rating on GKN PLC [LON:GKN] and raised its price target to 365p (from 345p|
|Engineering colossus GKN (LSE: GKN) also updated the market in Tuesday trade, although its share price hasn't fared so well, the firm last dealing 3% lower on the day. This is despite the company's announcing that its principal markets "performed in line with the expectations set out in our July results announcement."Organic sales at the Driveline division continued to outperform the market, a 6% revenues uptick during January-September dwarfing a 4% rise in global auto build rates. GKN had new product launches to thank for this decent result, as well as strong premium vehicle demand in Europe.GKN's Aerospace arm also continued to grow despite current challenges in the civil aircraft market, and organic sales here rose 2% in the nine months. But weak agricultural machinery demand caused organic sales at Land Systems to slip 8% in the period to September.Sure, GKN's main markets are expected to remain under pressure for a little longer. But I believe the part builder's top-tier relationship with major OEMs across the globe sets it up as a hot growth pick in the long term.This view is shared by much of the City, and a 1% earnings rise this year is anticipated to rev to 11% in 2017. I reckon a forward P/E rating of 11.2 times and 10 times for these years represents splendid value.|
|GKN - Slow and steadyEquity research team | 25 October 2016 | A A ASlow and steadyGKN announced a 21% increase in sales for the nine months to the end of September, including organic sales growth of 2%, in line with management expectations. The shares fell 2% in early trading.Third Quarter Trading StatementManagement sales to the 30 September 2013 were £6,895m (2015: £5,683m). This 21% increase comprised £151m (2%) organic growth, acquisitions of £587m, and currency benefits of £474m.Margin was, as expected, lower than a year previously. Following the commencement of a £35m restructuring programme and the inclusion of the lower margin Fokker Technologies business. Operating cash flow remains similar to the previous period.GKN Aerospace - Sales of £2,496m. Organic sales grew 2%, boosted by increased production of the A350, A320 and Boeing 737, with additional currency benefits of £126mGKN Driveline - Sales of £3,075m. Organic sales grew 6%, against industry growth of 4%, with additional currency benefits of £238mGKN Powder Metallurgy - Sales of £762m. Organic sales were flat, with currency tailwinds of £64mGKN Land Systems - Sales of £534m. Organic sales declines 8%, partially offset by a £44m currency tailwind|
|GKN 9-Month Management Sales Climb; Sees Easing Growth Rates In Major Markets(RTTNews.com) - GKN plc (GKN.L, GKNLY), an engineering business for the aerospace and automotive markets, on Tuesday said its nine-month management sales increased 21%, including organic sales growth of 2%, in line with expectations.In its trading update, the company noted that its principal markets performed in line with the expectations. Management sales were 6.895 billion pounds, higher that last year's 5.683 billion pounds.Sales in the Automotive businesses continue to perform well against the market and the Aerospace division grew in line with expectations. Land Systems' markets remain tough. GKN Aerospace sales went up 2% on an organic basis. GKN Driveline organic sales increased 6%.As expected, organic profit performance and trading margin was lower than last year primarily due to one-off items, including the costs of the restructuring, launch related costs in GKN Driveline, the absence of last year's one-off benefits in GKN Aerospace and the inclusion of Fokker Technologies .Nigel Stein, Chief Executive, said, "In line with the global economic outlook, we see growth rates easing in our major markets. The automotive market is now forecast to see a 1% increase in light vehicle production in the final quarter. New commercial aerospace programmes continue to ramp-up, although at a slower rate than expected. ... Despite the slightly tougher macro-economic environment, the Group continues to expect 2016 to be another year of growth."The company will issue its 2016 full year results announcement on February 28.|
|08:20 25/10/16Aerospace and automotive engineering group GKN issued a trading update for the nine months to 30 September on Tuesday, with management sales increasing 21% to £6.9bn, including organic sales growth of 2% - or £151m - in line with expectations.The FTSE 100 company said sales in the automotive businesses continued to perform well against the market and the aerospace division grew in line with expectations, though the land systems markets remained tough.As it had previously anticipated, the group trading margin was lower than the equivalent period last year, which it put down to the commencement of the £35m restructuring programme, launch related costs in GKN Driveline, the absence of last year's one-off benefits in GKN Aerospace and the inclusion of Fokker Technologies.The board said operating cash flow was similar to the equivalent period last year.GKN Aerospace sales in the nine months were £2.5bn, up 2% on an organic basis with beneficial currency translation of £126 million.Commercial sales were helped by the ramp-up in production of the Airbus A350 and A320 airliners, and the Boeing 737 airliner which more than offset lower Airbus A330, A380 and Boeing 777 sales.GKN said military sales were lower than the prior year, reflecting the continuing decline of mature programmes - primarily the F/A-18 Super Hornet and UH-60 Black Hawk helicopter.Fokker Technologies - acquired on 28 October 2015 and now GKN Aerospace Fokker - added £580m of sales in the nine months.The integration plans were progressing well, the board reported, and GKN Aerospace Fokker performed in line with expectations."For GKN Aerospace overall, the mix of new and mature programmes, together with slower than expected customer ramp-ups, restricted our ability to offset last year's one-off benefits," the board said in a statement."This and the inclusion of Fokker, led to lower margins than the same period last year."GKN Driveline sales in the nine months were £3.1bn, with organic sales increasing 6% - against global industry production rates that were up 4% according to the board - and beneficial currency translation of £238m.External forecasts continued to expect full year global auto production to increase by 3%, the board added.It saw strong, above-market organic growth continue in Europe due to new programme launches and the strength of premium vehicles.GKN Driveline performed above the Americas market as well, which the board said was helped by new programme launches in North America.Within Asia, sales growth in China was above the market too as new programmes and customer mix more than offset GKN Driveline's lower exposure to domestic brands and smaller vehicles.The division's margin was below last year's equivalent period due to "significant launch costs" on a US all-wheel drive programme, as previously reported."These additional costs are now on a downward trend, although the second half is likely to see a similar impact to the first half," the board explained.GKN Powder Metallurgy sales in the nine months were £762m, up from £694m, with beneficial currency translation of £64m.Organic sales were flat, the board said, reflecting slower demand in North America offset by improved sales in Europe and Asia.There was also reportedly a negative impact on powder sales from the direct pass through of lower raw material prices, which helped GKN Powder Metallurgy report slightly higher margins than the comparable period last year.GKN Land Systems sales in the period were £534m, marginally lower than the £535m reported for the same period last year, with organic sales declining 8%.That was primarily due to weak demand for agricultural equipment and the ending of two chassis contracts, offset by a £44m benefit from currency translation.On 21 October, GKN announced that it had agreed to sell the Stromag business for an enterprise value of 198m, with completion expected in the first quarter of 2017."From 1 January 2017, GKN Land Systems will no longer operate as a division, with Shafts and Services being reported within GKN Driveline and Wheels and Structures moving to Other businesses," the board confirmed.Sales for GKN's other businesses fell to £28m, from £33m a year earlier, reflecting the scale back of GKN Hybrid Power, which caused the segment overall to report a small loss in the period."GKN has continued to make progress," said chief executive Nigel Stein."Organic growth was 2%, whilst we also benefitted significantly from the successful acquisition and integration of GKN Aerospace Fokker as well as from favourable currency translation due to the weakness of sterling."As expected, our organic profit performance was down primarily due to one-off items, including the costs of the restructuring, which will position us better for the years ahead."Stein said in line with the global economic outlook, the board sees growth rates easing in its major markets."The automotive market is now forecast to see a 1% increase in light vehicle production in the final quarter [and] new commercial aerospace programmes continue to ramp-up, although at a slower rate than expected."Our military aerospace programmes and agricultural equipment markets look set to continue their decline," he explained."Despite the slightly tougher macro-economic environment, the group continues to expect 2016 to be another year of growth."|
|Down today on Senior warning, but seems aerospace doing ok!|
|Only a week to wait, then.|
|Guess we are waiting for a 3Q trading statement before any more significant moves, seems to be moribund for the time being!|
|HSBC appaently start coverage with buy rating and 395p target.|
|I hate to say it, but the logic is undeniable. Their best chance would be to get a private equity house on board to take on Aerospace. I am sure a government backed Chinese company is not too worried about pension liabilities, their long term aim is to dominate the world!|
|The GKN Chinese whisper that refuses to die:Fri 23.9.16MARKET REPORT: China seeks predators to join £7billion bid for GKN http://dailym.ai/2daXpmQ via http://dailym.ai/moneyapp|
|The gist of much of the (sensible) comment on the bid rumours stressed that that event is, indeed, unlikely due to the deficit in the pension fund.|
|Your referring to last weeks Chinese whisper? Been tipped as a buy in Sunday's financial papers but they must do more cost cutting and sort out the 2.1 billion pension liabilities. One to buy and hold.|
|Talk of bid rumour of £4.5O.
Specific name and price mentioned.
Worth a punt.|
|MW, completely understand and agree with you, I'd like to see them remain British also, and yes of course if that happened there would be plenty of places to deploy the funds - wouldn't say no.
But this rumour surfaces every few months, suspect it more likely a Chinese group would try to buy them rather than GE / Siemens though.|
|imo I can't see what would be of interest to either.|
I'd rather see a bid at £4.20 from Siemens or GE, sell at £4.50 when an auction ensues and the use my £4.50 to "accumulate in a different quality company at these prices".
I'd like to see it remain british owned though.|