Meggitt Drops Most in 23 Years as Profit Slump to Hit Jobsby and
Full-year earnings to be `meaningfully below' forecasts
Other aerospace stocks slide following outlook revision
Meggitt Plc fell the most in two decades after the U.K. supplier of aircraft wheels and brakes said full-year earnings will fall short of forecasts following a “marked deterioration” in demand, causing it to seek 300 job cuts.
Meggitt shares dropped as much as 24 percent Wednesday as the Bournemouth, England-based company said third-quarters figures were hurt by lower-than-expected sales of aircraft spares, customer program deferrals and a softening market for its energy business. Plans to cut the payroll should be executed in the first quarter of 2016, it said, led by reductions at the Heatric division.
With trading set to remain tough into the fourth quarter, underlying profit for the 2015 will now be “meaningfully below” the company-compiled consensus of 369 million pounds ($565 million), Meggitt said in a statement. That could translate to earnings that are between 7 and 15 percent lower than that figure, Chief Financial Officer Doug Webb said on a call with analysts.
“The current market weaknesses we are experiencing are very disappointing,” Chief Executive Officer Stephen Young said. “We continue to invest in delivery against the many new programs we have won in recent years and remain confident in the medium to long-term strategic direction.”
Shares of Meggitt, touted as a potential takeover target by some analysts, fell as much as 112.50 pence to 348.90 pence, the biggest intraday drop since Sept. 21, 1992, and were trading 20 percent lower at 370.90 pence as of 12:24 p.m. in London. The stock has declined 29 percent this year, reducing the company’s market value to 2.87 billion pounds.
Other U.K. aerospace stocks also fell, with aerial-refueling-gear specialist Cobham Plc down as much as 4.4 percent, Senior Plc, which supplies Airbus Group SE and Boeing Co., losing 3.5 percent, and engine-maker Rolls-Royce Holdings Plc declining 2.9 percent.
While Meggitt said demand for new civil-aerospace equipment increased 2 percent in the third quarter, the benefit was more than offset by a 2 percent decline in the military market, a 16 percent drop in energy and flat sales of civil spares, leading to a 1 percent slide overall.
“The thing that the whole industry is struggling with is short term visibility, and I think we have more of that to come,” Young said.
The energy arm, which the CEO earmarked for growth after a slump in defense budgets, has experienced a reversal as the falling price of crude curbs oil-industry activity. The unit, which includes Heatric, a manufacturer of heat exchangers used in oil and gas processing, has suffered repeated delays to 600 million pounds of contracts as the sector pares capital spending.