Analysts upbeat on prospects for GKN shares

14th July 2014

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Despite some recent share price volatility brokers are tipping blue-chip engineer GKN as a ‘buy’ as its long-term outlook remains robust.

While the firm, which works in the automobile and aerospace sectors has endured a 7% share price drop in the past three months – versus an 8% hike over the last year – today it has announced a multi-million dollar contract win with AirAsia to supply high performance glass front windshields and light weight acrylic side windows for the carrier’s new A320 fleet.

The broker consensus already has the stock in ‘buy’ territory and analysts at both Westhouse Securities and JP Morgan Casenove have both recently reaffirmed their positive outlooks for the group, as has The Share Centre.

Against the tide Credit Suisse, has however reiterated a ‘reduce’ recommendation.

Sheridan Admans, investment research analyst at The Share Centre, highlights that the FTSE 100 constituent currently trades on a forward P/E of around 14 times and is in a sector exhibiting good value at present, both on a national and international basis.

He says: “The company believes that it is set for another year of continued progress and we recommend it as a ‘buy’ for medium risk investors looking for a balanced opportunity.”

The company is regarded as having a good mix of business and geographical spread and sales and profits have been supported by global light vehicle production with noticeable demand from Japan, China, North America and Europe notes Admans, adding that demand for commercial aerospace remained robust in the first quarter.

He says: “The aerospace part of the business, which is regarded as having higher, more reliable earnings now accounts for around 40% of group profits. In addition, GKN is likely to benefit from the increased production at Airbus and Boeing for some time, and continues to do well from light vehicle production, as global demand is expected to rise this year.”

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