Peel Hunt has warned that Senior PLC (LON:SNR) may take two years to recover from the impact of the Boeing 737 Max’s grounding in March, as it upped its rating to ‘Buy’.
The FTSE 250 tech designer makes sensors and other components for the aerospace, defence and power sectors, and counts aeroplane manufacturer Boeing among its top customers.
Boeing is currently involved in a US justice department investigation over its best-selling 737 Max plane, which was grounded in March after two crashes in Ethiopia and Indonesia which together killed 346 people.
Peel Hunt predicted a “gentle descent” for Senior, cutting £2mln off the group’s before-tax profit expectation for the full year to £78mln, given sales growth in aerospace, the company’s key sector, is likely to be flat at 1%.
The forecast stayed in line with the tech designer’s reported earnings this year, which have so far been buffeted by turbulent headwinds bringing half-year pre-tax profits down 16% to £26.5mln.
The broker also gave a wintry outlook for 2020, with profits only set to inch up £1mln to £79mln, followed by a full rebound to £89mln in 2021.
The group’s Flexonics division, which produces metal hoses for use in power generation and land vehicles, accounts for a quarter of its total revenue – but may not be able to offset the damage given its total sales fell 7% in the first half of the year.
Peel Hunt said the 737 Max is now unlikely to return-to-flight in 2019 and predicted “further slippage” from Boeing’s July expectation of a fourth-quarter comeback for the commercial aircraft.
The broker added that while its assumptions over the plane’s return “may still be too optimistic”, it still expects the 737 to be a “major growth driver over the medium-term”.
Shares have almost halved from Senior’s peak of 318.1p in August last year and were little moved from a price of 174.6p in Monday morning trading.