FTSE 100 aircraft parts manufacturer Meggitt (MGGT) is in free-fall - down 10% at 515.5p – as it says it expects revenues to grow in the low-single-digits this year, down from its August prediction of mid-single digit gains.
The heavy sell-off is a reminder of what can happen to highly-rated stocks if performance fails to match up to expectations; yesterday the share price closed at a record high of 572.5p.
In today's statement, Meggitt warns of trading in the third quarter being slightly below expectations due both to production problems at its sensing unit and the timing of contracts in its energy business. It also identifies a raw material supply issue relating to one product type dating back to 2012, and is making a £20 million provision to cover potential financial losses associated with fixing the problem.
The £4.1 billion cap continues to predict revenue growth of mid-single-digits in 2014 and encouragingly for our positive view on the wider civil aerospace sector (discussed in some depth here) it says end-market indicators in this industry 'remain encouraging' giving 'confidence in good future growth in civil revenues'. Conversely it continues to cite uncertainty in the defence market thanks to US spending cuts.
Investec, which cuts its recommendation on the stock from 'add' to 'hold' and its price target from 600p to 515p, also trims its pre-tax profit forecasts for 2013 and 2014 by 7% apiece. Cantor Fitzgerald reiterates its own hold advice and price target of 520p and comments: 'Once the knee jerk reaction is through we will reassess the future years' prospects where growth should remain reasonable.'