Melrose Industries PLC (LSE:MRO, OTC:MLSPF) shares recievd a boost after RBC Capital raised its price target for the aerospace-focused manufacturer to 760p from 650p, citing an improving cash flow outlook and strong growth potential.
The bank maintained its 'outperform' rating, suggesting there is further room for the stock to rise.
RBC expects Melrose’s cash generation to turn positive in 2025, with free cash flow improving steadily over the next five years.
By 2029, it forecasts free cash flow of £588 million, which is at the top end of consensus estimates.
The company's restructuring efforts and investment in additive manufacturing, which reduces material waste and costs, are seen as key drivers of profitability.
Melrose, since buying former GKN Aerospace assets, has shifted from its previous buy-and-sell strategy to a long-term aerospace business model.
RBC sees further upside in its risk and revenue sharing partnerships in jet engine programmes, with cash flow from these expected to increase significantly towards 2030.
In morning trading, the shares were up 1.3% at 620.6p, valuing the business at £8 billion.