Babcock stock rises on positive JPMorgan outlook

Investing.com -- Shares of Babcock International Group PLC (LSE:LON:BAB) climbed 3% following a favorable assessment from JPMorgan, which highlighted the company’s potential for significant volume growth and free cash flow (FCF) improvement.

The financial institution added Babcock to its Analyst Focus List and placed it on Positive Catalyst Watch as the company approaches its second-quarter 2025 results.

JPMorgan’s optimistic stance comes after a double upgrade of Babcock’s stock in late February 2025. The firm’s analysis points to a brighter future for Babcock amidst uncertain macroeconomic conditions and trade dynamics.

Notably, copper prices, which are critical to Babcock’s business, have bounced back to near pre-Liberation Day levels. Additionally, gold prices, a vital byproduct for the company, have increased by 8%. Concurrently, costs for inputs like oil and treatment and refining charges (TC/RCs) have declined.

According to JPMorgan’s Commodities team, the copper market is expected to experience modest surpluses in 2025 and 2026. However, they forecast a shift to a deficit starting in 2027, which is anticipated to grow to over 3 million tonnes by 2030. This projection is supported by the potential for supply disruptions to tighten the market in the near term.

The investment bank’s report further suggests that Babcock’s copper production could grow by 15% to 30% through 2027 and 2028 compared to 2024, outpacing its Global Copper peers.

This growth trajectory is expected to drive a decrease in the company’s enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio from approximately 9 times in 2025 to about 5 times in 2028. Additionally, Babcock’s FCF yield is projected to swing from a negative 3% in 2025 to a positive 7% in 2028, which compares favorably to its peers’ average of around 6%.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.