Cobham Slumps as Sales Forecast Cut on U.S. Defense SpendingRobert Wall
Cobham Plc, the world’s largest maker of airborne refueling equipment, fell the most since June in London trading after saying organic sales will decline next year amid further cuts in U.S. defense spending.
Organic revenue will retreat by “low-to-mid single digits” in 2014, the Wimborne, England-based company said today in a statement. Cobham previously forecast potential for modest organic growth next year and now projects that to occur in 2015.
Cobham already lowered its sales outlook for next year in August as the U.S. defense market weakened because of so-called sequestration legislation that mandates spending cuts in the U.S. and in the absence of a budget for the fiscal year that began in October.
“Cobham is seeing some of the biggest challenges from the U.S. defense spending cuts,” Robert Stallard, an RBC Capital Markets analyst wrote in a note to clients. “We share management’s view that the outlook is not looking any better.” Stallard has a negative rating on the stock.
Cobham traded 4.2 percent lower at 272.40 pence as of 8:20 a.m. in London, valuing the business at 2.9 billion pounds ($4.6 billion). The stock has advanced 24 percent this year.
The outlook for this year remains unchanged, with sales expected to contract and operating margins also below last year’s level, the company said in the statement.
“Cobham will take further actions as appropriate to substantially mitigate the impact of organic revenue declines on the group’s trading margin,” the company said.