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On Thursday, JPMorgan analysts increased the price target on Babcock International Group Plc (LON:BAB:LN) (OTC: BCKIF) to GBP 7.60, up from GBP 7.00, while maintaining an Overweight rating on the stock. The adjustment follows Babcock’s trading update for the first nine months of the fiscal year ending March 2025, which highlighted several positive developments.
According to JPMorgan, Babcock anticipates that both revenue and underlying operating profit will surpass the highest analyst expectations. Previously sitting at the top of the consensus range, JPMorgan has adjusted its estimated earnings per share (EPS) for the fiscal years March 2025 to 2027, increasing them by 4%, 3%, and 3% respectively. This revision positions their estimates to be 11%, 8%, and 8% above the Bloomberg median consensus.
The trading update also revealed progress on the Type 31 frigate program. Babcock expects the first ship, HMS Venturer, to be launched in the first half of the fiscal year ending March 2026, with the second ship, HMS Active, following in the latter half of the same year. The analysts at JPMorgan believe that the anticipated launch of these ships will significantly reduce the investment risks associated with the program.
In addition to the progress on the frigate program, Babcock secured a contract in France worth up to €800 million, named Mentor 2, to provide military air training. This contract is seen as a strategic move for Babcock, as it diversifies the company’s business beyond the UK market and supports medium-term growth prospects. The contract is expected to bolster Babcock’s position in the defense sector and contribute positively to its financial performance.
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