Melrose Industries trades close to a 52-week low, as disappointing 2026 profit guidance and a California facility scare overshadow strong 2025 results.
Shares in Melrose Industries are trading near their lowest point in a year, with the FTSE 100 aerospace group caught between a strong set of full-year 2025 results and two sharp setbacks that have erased roughly 30% of its value since February.
Shares are trading at 473.4p, up 0.98% on the session on Wednesday, recovering modestly from a 52-week low of 443.4p touched on 10 June. The stock reached 681.8p in February, close to the time of its annual results, before successive bouts of selling left it trading well below the consensus analyst target of around 684p.
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Strong Results, Softer Guidance
Melrose reported full-year 2025 results on 27 February, with revenue rising 8% to £3.59 billion, adjusted operating profit up 23% to £647 million and adjusted diluted earnings per share ahead 25% at 32.1p. Free cash flow reached £125 million, described by management as a positive inflection point, and the board proposed a full-year dividend of 7.2p per share, a 20% increase.
Markets, however, focused on the 2026 outlook. Adjusted operating profit guidance of £700 million to £750 million for the current year fell short of a prior analyst consensus of around £754 million, according to Proactive Investors. The Airframes division was guided to £170 million to £190 million against analyst expectations of around £210 million, with management citing lower business jet volumes and productivity issues at a Dutch manufacturing site.
A further blow came in late May, when GKN Aerospace’s Garden Grove facility in California suffered a thermal incident involving a chemical storage tank, prompting local evacuation orders. Shares fell as much as 7% on 26 May before partially recovering after Melrose confirmed no injuries or contamination and said it was working with customers on supply recovery.
Those moves follow Melrose’s repositioning as a pure-play aerospace and defence group after demerging its automotive business as Dowlais. The Engines division, which lifted revenue 15% to £1.63 billion in 2025 at margins of 31.9%, provides a resilient aftermarket earnings base, while Airframes has been weighed down by civil aircraft production ramp-up delays and supply chain disruption.
Analyst sentiment remains broadly bullish despite the de-rating. Citi carries a Buy rating with a 763p target, while analysts at Peel Hunt hold an 830p target, arguing Melrose trades at roughly eleven times 2026 EBITDA against global aerospace peers on 14 to 15 times. UBS takes an opposing view, carrying a Sell rating and a 430p target. Chief executive Peter Dilnot said at the full-year results that the group was “well-positioned for further growth in 2026 and to meet our 2029 targets.”
The half-year results, due in July, are the next key test: markets will be watching whether the Airframes division is recovering and whether the Garden Grove disruption has been contained. Melrose expects free cash flow of £150 million to £200 million for 2026, weighted to the second half, with revenue guided to £3.75 billion to £3.95 billion. Rising NATO defence budgets, given additional momentum by US military action against Iran in May, continue to support the demand backdrop for Melrose’s defence-facing revenues.