Stock of the Day: BE Aerospace (BEAV)
My Stock of the Day is BE Aerospace (BEAV).I have been bullish on this stock and owned it for clients for a couple of years. But rather than running its course, I felt the story continued to get better.
Profitability continued to improve; the company paid down huge debt; and it continued to win more and more contracts and grow its backlog. Moreover, the upgrade cycle for airliners is a long-dated cycle, and doesn't run its course overnight.
The stock has been under pressure recently, even though the company reported solid results in its latest quarter, and said its outlook remains very positive. I think that investors are still worried with the potential slowdown in the overall global economy.
Today, the company said it won $200 million worth of contracts from unnamed airlines to refurbish wide-body cabins and put in new first-class suites. These are profitable contracts for them.
The CEO said that these contracts along with continued "robust market conditions" strengthened its expectation for continued growth in their backlog and "superior" earnings growth over the next three years.
And the stock reacted very well, rising 9% today on a big pickup in volume. This is bullish action, and I would be looking to add shares where I didn't already have a full weighting.
long BEAV
posted by J. Kahn @ 12:55 PM
2 comments
2 Comments:
Interesting. What effect do you see a consolidation of the airline sector having on BE's bottom line?
Can you draw any comparison between BEAV and Boeing/Airbus sales?
The reason I'm asking is that if we see new airframe sales drop off, we could see an increase in refurbishments, which could only increase contracts for BEAV.
I may be completely off base.
What do you think?
-Grant
I think that BEAV will benefit regardless of who wins between Boeing and Airbus. More planes = more contracts.
And it isn't just refurbishments, new plans need new cabins, etc. as well.
The only big negative on the horizon for BEAV would be a big global slowdown or recession. So watch China and emerging markets carefully.
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