Neil Woodford favorite Babcock International (BAB) gets a boost in early trading on an upbeat trading statement that says more than two-thirds of next year’s budgeted revenue has been secured.

The outsourcer, which features in Woodford’s CF Woodford Equity Income Fund (ISIN:GB00BLRZQ513), also says earnings for its financial year to April are in-line with expectations.

BABCOCK INTERNATIONAL - Comparison Line Chart (Rebased to first)

The update today is likely to entrench positions among analysts, who remain divided on the stock.

For the bulls, a strong order book, valued at £20 billion, roughly in-line trading excluding the currency conversion impacts of a weak euro and good cash generation are all positives.

Bears will point to a £6 million hit to profitability in the Avincis unit which transports oil workers to rigs by helicopter. Oil and gas-related exposure in the division, which Babcock bought last year for £1.6 billion, is estimated at 30% of sales.

‘The broad, underlying message from Babcock remains solid, with the traditional businesses trading as expected,’ says Investec Securities analyst James Dawson.

‘Likewise, newly acquired Avincis is trading in-line but the group does expect some adverse impact in 2015/16 due to a possible reduction in discretionary spend in the oil and gas sector.’

Dawson has a ‘buy’ rating and an £11.50 price target on the stock. Babcock's stock trades 2.6% higher this morning at £10.55.

Issue Date: 10 Feb 2015