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On Wednesday, Jefferies analyst David Farrell increased the price target for Chemring Group Plc. (LON:CHG:LN) (OTC:CMGMY) to GBP5.30, up from GBP5.00, while reiterating a Buy rating for the defense contractor. The new price target represents a confident outlook from Jefferies, setting it as the highest among analysts covering the stock.
Farrell’s optimism is based on a robust year-to-date order intake, which he believes will allow investors to look past the current year’s weak earnings per share (EPS) growth and focus on the expected compound annual growth rate (CAGR) of over 20% for EPS from fiscal year 2025 to 2028. This growth projection is attributed to the expansion of new Energetics capacity and a forecasted return to strong growth at Roke, Chemring’s cyber security and electronic warfare subsidiary.
The analyst highlighted that the anticipated growth is likely to lead to a continued re-rating of the stock as Chemring’s earnings before interest, taxes, and amortization (EBITA) margins expand. The company’s half-year fiscal 2025 results, which are scheduled to be released on June 3, 2025, are expected to provide further insight into the company’s financial trajectory and operational progress.
Chemring’s performance is being closely watched by investors as the company positions itself in the defense sector, which is experiencing dynamic changes and demands. The firm’s focus on Energetics, which includes products related to aerospace and defense such as missile components, and Roke’s expertise in cyber security and electronic warfare, are central to Farrell’s positive outlook.
Investors and market observers will likely be paying close attention to the upcoming financial results to assess whether Chemring can meet the high expectations set by Jefferies and to gauge the potential for future growth and margin expansion as projected by the firm.
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