2016 outlook: Moving towards convergence
Safran still CL-Buy; Thales to Neutral, MTU to Buy, Qinetiq to Sell
Safran (CL-Buy) remains our top pick in European A&D. We remove Thales from the Conviction List and downgrade it from Buy to Neutral following outperformance. We upgrade MTU Aero Engines to Buy and downgrade Qinetiq to Sell (both from Neutral). We reiterate our Buy ratings on BAE Systems, Dassault Aviation and Rolls-Royce, and remain Neutral-rated on Airbus, Cobham, Finmeccanica, Meggitt, Saab and Ultra Electronics. We update our estimates and price targets across our coverage to reflect FX moves and recent company developments. Our price targets are flat on average, falling by 3% for the aerospace stocks and rising by 3% for the defence stocks.