October 16, 2018 / 6:39 AM / a month ago

RPT-UPDATE 2-Meggitt higher on upgrade to 2018 revenue growth

* Sees 2018 organic revenue growth at 7-8 pct, up from 4-6 pct

* Second upgrade in four months

* Shares gain 5 pct (Adds analyst comment, share price)

By Sarah Young

LONDON, Oct 16 (Reuters) - British engineering company Meggitt raised its estimate for 2018 organic revenue growth to 7 to 8 percent from earlier guidance of 4 to 6 percent, boosted by higher demand for its wheels, brakes and other aerospace parts.

Shares in Meggitt climbed 5 percent to 519 pence at 0754 GMT on Tuesday, making the company the top gainer on Britain’s mid-cap index after what was the company’s second upgrade to revenue forecasts in four months.

Analysts at Investec said the news would boost confidence in Meggitt. The company had disappointed investors earlier this year when its 2017 results missed forecasts.

“We expect the improved operational performance to increase confidence in Meggitt’s long term outlook and support a re-rating towards commercial aerospace peers,” Investec’s Rami Myerson, who has a “buy” rating on the stock, said in a note.

Meggitt has outperformed the mid-cap index over the last six months, rising 18 percent, compared to a 4 percent fall in the FTSE 250.

But despite the positive forecast for revenue, Meggitt stuck to its forecast for operating margins, saying they would be at the lower end of a 17.7 percent to 18 percent range.

The company had already warned investors that difficulties in its polymers and composites unit, a part of the business that makes sophisticated engine parts which can withstand high temperatures from composite materials, would drag on margins this year.

Meggitt said on Tuesday its third quarter was buoyed by demand from customers in the civil aerospace sectors, with more planes, both large jets and business jets, manufactured, and fewer aircraft retirements fuelling demand for spare parts.

In the defence sector, Meggitt said continued demand for retrofit fuel tanks as well as new parts for military planes helped drive sales. (Reporting by Sarah Young; editing by Kate Holton and David Evans)

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