MENU

Today’s Falling Knife: Manufacturing Blunder To Cost Meggitt Plc £20m

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.

So do Meggitt shares make it into "5 Shares You Can Retire On", the Motley Fool's free wealth report for long-term investors?

If you want to find out if Meggitt's value opportunity earns its shares a position in our exclusive retirement report, why not download your copy for free?

Just click here to download the free stock research!

> Mark does not own any shares in this article.