LONDON (Alliance News) - UBS kept a Neutral stance on Cobham, despite the FTSE 250 electronics firm scrapping its final payment after saying 2016 profit will miss its thrice-downgraded guidance.
The Swiss bank noted the defence and aerospace technology group's "long track record of dividend growth".
Shares in Cobham dropped on Wednesday following its announcement, down 15% at 140.03 pence, the worst performer in the mid-cap index.
The stock touched a low of 130.30p earlier on Wednesday, its lowest level since October, when it fell to 129.80p. This was just above a 52-week low of 124.32p touched in May last year, the lowest in 11 years.
Cobham said trading profit for the year to December will be GBP245.0 million, below the guidance range of GBP255.0 million to GBP275.0 million that it provided in October.
The new guidance also is below UBS's profit estimate of GBP263 million.
Cobham said its management team is starting a balance-sheet review, including looking at major contracts and carrying values. The profit guidance it provided on Wednesday is before any adjustments this review may require.
"We believe the main headwinds are still very much related to the short-cycle businesses in Communications & Connectivity and Advanced Electronics Solutions," said UBS analyst Cristian Nedelcu.
In light of the challenges it faces and the "disappointing" 2016 performance, Cobham said it will scrap its final dividend payment for 2016. It paid a 2.030 pence dividend at the interim stage of 2016, down from 2.585p a year before. In 2015, it paid a total dividend of 11.180p.
Despite this decision, UBS noted the company's remarkable record of dividend growth in the past.
"We note Cobham has a long track record of dividend growth ? with 45 consecutive years of increasing dividends as of 2015," Nedelcu said.
Accendo Markets analyst Michael van Dulken, said the latest guidance cut has been "the nail in the coffin" for the final dividend, "perhaps the one thing that had kept the loyal from jumping ship".
Cobham issued a series of profit warnings over the course of 2016, kicking off with a warning in April accompanied by a rights issue to shore up its balance sheet and culminating in another warning in October.
Alongside its neutral stance, UBS retained a price target of 160p on Cobham shares.
By Daniel Ruiz; danielruiz@alliancenews.com
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