The shares of Meggitt (LSE:MGGT) crashed by 8% to 526p in early London trade this morning after the specialist defence manufacturer revealed that a manufacturing blunder had caused the company to set aside £20m in potential costs.
Meggitt, which designs and creates niche components and sub-systems for the defence and aerospace industries, also lowered its outlook for this year’s revenue growth to “low single digits”.
Today’s manufacturing mishap relates to a raw material supply issue dating back to last year.
Looking further ahead, the company gave some guidance for growth in 2014:
“Based on current projections, and notwithstanding the uncertainty in military end markets, the Group continues to expect percentage constant currency revenue growth in the mid-single digits in 2014.”
With a market cap of £4.1bn, Meggitt’s shares trade at 13 times their expected earnings, and offer a prospective dividend yield of 2.5%.
Of course, whether that valuation, today’s update and the future prospects for the defence industry all combine to make shares of Meggitt a ‘buy’ remains your decision.
Manufacturing blunders and shocking headlines are never good publicity for a company, but it can also present long-term investors with opportunities to invest if the market overreacts.
