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Babcock Shares Fell 14% on Disappointing Full-Year Earnings Results, What’s Next?

Simon Mugo trader
Updated 13 Aug 2021

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Shares of Babcock International Group PLC (LON: BAB) fell 14% after releasing its much-awaited earnings results for the fiscal year ended March 30, 2021, on Friday.

Investors were disappointed after the specialist engineering firm announced a pre-tax loss of £1.72 billion, a significant jump from the £88.9 million loss recorded last year.

Babcock’s massive losses were driven by a £2 billion impairment charge related to the unprofitable contracts and accounting errors that have plagued the company in recent years.

Many investors are wondering what’s next for Babcock shares following the latest pullback. Of course, we can not predict the future, but it seems like the worst is now over for Babcock shares following its latest earnings results.

The British aerospace, defence, and nuclear engineering company recently unveiled a new turnaround plan to restore it to strength without issuing new equity, a welcome relief for shareholders.

Babcock noted that it would be in a period of transition throughout the rest of the 2022 financial year, primarily due to the impact of the coronavirus pandemic.

However, the benefits from the streamlined operational model will start accruing this year with the ultimate goal of saving the company up to £40 million in operating costs each year.

Analysts covering the stock noted that Babcock’s core business provides ‘essential services’ to companies in the marine, defence and aviation sectors, which are on a growth trajectory presenting an excellent long-term opportunity to investors.

From a technical perspective, Babcock shares are trading at a support level in the middle of a more extensive trading range, which to conservative traders might not provide a great trade setup.

*This is not investment advice.

Babcock share price.

IG chart of Babcock share price 02-08-2021

Babcock shares edge higher following Friday’s 14% drop after the release of its full-year earnings results.

Should You Invest in Babcock International Shares?

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Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading