On Friday, Berenberg made an adjustment to the financial outlook for RENK Group AG (R3NK:GR) shares, a company operating within the European defense sector. The firm's price target for RENK Group was lowered to €33.00, a decrease from the previous target of €35.00. Despite this change, the firm has maintained its Buy rating on the company's shares.
The rationale behind the price target revision was attributed to the necessity for RENK Group to achieve a robust performance in the fourth quarter of 2024 in order to meet its full-year guidance. Berenberg noted that the pattern of financial results being weighted towards the second half of the year is common among European defense companies due to the timing of deliveries and order intake.
Berenberg expressed confidence that RENK Group would fulfill its full-year guidance, citing the company's valuation as attractive after a period of sustained share price weakness. The firm pointed out that RENK Group's shares are trading at a price-to-earnings (P/E) ratio of 22.2 times for the year 2024, which is in line with expectations for a compound annual growth rate (CAGR) of 26% in earnings per share (EPS) over the three-year span from 2025 to 2027.
Moreover, Berenberg highlighted the company's favorable free cash flow (FCF) yield, which is projected to be 7.1% in 2026. This figure stands in contrast to the broader European defense sector's FCF yield of 5.3%.
In light of these factors, Berenberg reiterated its Buy rating for RENK Group and recommended the current depressed share price as an opportune entry point for investors. The adjustment in the price target reflects updated estimates for the company's EPS and FCF.
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