Melrose Industries PLC shares plunged 13% Friday after the British aerospace and defence supplier issued 2026 profit guidance below analyst expectations, despite reporting a full-year earnings beat. The company projected revenue of £3.75-3.95 billion and free cash flow of £150-200 million, both falling short of market forecasts. This overshadowed a 23% jump in adjusted operating profit to £647 million for the year ended December 31.

The company achieved its first positive free cash flow in two years at £125 million, up from a £74 million outflow in 2024. Revenue grew 8% to £3.589 billion, with the Engines division posting strong results including a 15% revenue increase to £1.632 billion and 27% profit growth. However, the Airframes division faced challenges including lower civil original equipment volumes and productivity issues at a Dutch manufacturing site.

Melrose's stock decline reflects investor concerns about near-term growth despite the company's positive cash flow inflection point. The board declared a 20% higher dividend and announced a new £175 million share buyback programme. CEO Peter Dilnot emphasized substantial future cash generation increases, while the company reaffirmed 2029 targets of £5 billion in revenue and £600 million in free cash flow.