TT Electronics Share Price Targets Cut Following Trading Update

Electronic solutions engineering and manufacturing firm TT Electronics (LON: TTG) saw its share price targets significantly reduced by analysts following a disappointing trading update this week.

The company reported operational issues in two North American sites that have impacted both revenue and profitability.

The operational challenges have led to slower-than-expected order execution and increased production costs. As a result, TT Electronics now expects second-half revenue to be £15 million to £20 million lower than previously anticipated.

This revenue shortfall, combined with higher production costs, is expected to impact North American operating profit by £13 million to £18 million.

Despite the challenges in North America, the rest of the Group continues to perform in line with expectations. However, the overall impact of the operational issues has forced TT Electronics to revise its full-year adjusted operating profit guidance to £37 million to £42 million.

The lower profitability will also impact free cash flow, leading to a net debt-to-adjusted EBITDA ratio that is expected to be around or marginally above the top end of the company's 1-2x range by December 2024.

TT Electronics acknowledged the issues and said it has implemented plans to address them. However, the company's medium-term targets, including a 12% operating margin by 2026, remain unchanged.

In response to the trading update, several analysts lowered their price targets for TT Electronics shares.

Barclays cut its target for TT Electronics to 170p from 270p, keeping an Overweight rating on the shares, while RBC Capital lowered its target for the stock to 200p from 250p, maintaining an Outperform rating on the stock. The new Deutsche Bank price target for the Buy-rated name is 175p, down from 245p

Meanwhile, Jefferies lowered the price target to 110p from 160p, keeping a Hold rating. The firm told investors in a note that TT's H1 trading update “does not bode well for the wider sector” and “came as a surprise” as Jefferies said it only heard from the company a month ago and “did not get the sense at the interims that operational issues were this material.”

Elsewhere, Peel Hunt downgraded TT Electronics to Hold from Buy with a 120p price target, saying the company's trading update was disappointing. Berenberg also cut TT Electronics to Hold from Buy with a 100p target.