Two popular stocks being chased higher after latest results

Higher City price targets have backed the continued resurgence of Avon Technologies (LSE:AVON) and AIM-listed Volex (LSE:VLX) after their respective results drew a strong response today.

Avon rallied 145p to 2,005p after the supplier of respiratory protection and military headgear systems reported forecast-beating annual results, including a 38% rise in annual profits and an order book 16.7% higher at a record $263 million (£201 million).

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Adjusted earnings per share have more than doubled since 2023, when the company set out a turnaround strategy focused on simplifying operations, enhancing manufacturing efficiency and driving stronger returns from existing assets. 

The business is now split between Avon Protection, which provides respiratory and protective systems, and US-based Team Wendy as a supplier of military helmet systems.

The shares were more than 4,000p in 2020 when the company was known as Avon Rubber and a hugely popular stock for retail investors.

A product testing failure that would ultimately lead to the winding down of Avon’s body armour business triggered selling pressure, leaving the stock as low as 620p in autumn 2023.

The company is now back in the FTSE 250 index and the share price is within sight of prices not traded since summer 2021, boosted by a favourable market backdrop and its continued progress towards an operating margin target of 14-16% in 2026.

The margin in today’s results improved to 12.8% from 11.5% the year before, with Avon Protection up to 19.9% from last year’s 18.3% and Team Wendy’s at 4.6% from 3.9%.

Chief executive Jos Sclater said: “Nearly two years ago, we set bold ambitions for the business, which could only be achieved by significant change.

“This year, in particular, required enormous tenacity and dedication from our employees. That effort is paying off.”

He said the balance sheet provided a strong foundation and strategic optionality, adding that Avon has launched several “exciting” new products which will support future growth.

Peel Hunt lifted its price target by 25% to 2,250p following the results, believing that there is more to come in terms of margin progress. For the new financial year, the broker forecasts 8% organic revenue growth and margin expansion to 15.6%.

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Volex, which makes critical power and data transmission products, rose 44.5p to 417p after reporting double-digit organic revenue growth in half-year results. The shares have surged from 200p in April and now trade at prices last seen in November 2021.

The results included an 80% increase in data centre sales, a performance that reflected strong demand for high-speed cables driven by data-intensive artificial intelligence (AI) applications.

An underlying operating margin of 9.8% was towards the upper end of the group’s 9-10% target range, supported by operational efficiencies and productivity improvements.

Underlying profit rose 29.3% to $48.5 million and the interim dividend for payment on 8 January has been increased by 6.7% to 1.6p a share.

Peel Hunt boosted its price target to 450p and Jefferies moved to 470p, having lifted its revenues forecast for the next three years by 2% and earnings projections by between 3% and 8%.

It said: “Volex’s update is the most upbeat we have seen in the sector as of late, with growth/margin ahead of expectations, and strong momentum being maintained.

“Investments over recent years have paid off, and Volex is clearly in a comfortable position to meet its 2027 objectives, in our view.”

Volex also announced Dave Webster as non-executive chair, an appointment that is expected to allow further development of commercial relationships in North America. Executive chair and major shareholder Nat Rothschild will assume the role of chief executive.