Exclusive Analysis for the Discerning Investor
The Farnborough Airshow did not disappoint. We care less about who wins the battle between Boeing and Airbus as the best risk-adjusted investments are in the supply chain. There are few industries that have better demand visibility than aerospace at this time.
Engine maker Cummins is cutting its full-year outlook in light of lower-than-expected demand. We touch on recent guidance cuts and the health of the economy.
Aluminum giant Alcoa reported better than expected results. We think shares are fairly valued.
May retail sales were down 0.2% from April, but up 5% from May 2011. We think investors should remain focused on the big picture.
Although a number of suppliers to the aerospace industry have come under pressure as of late, the strength in commercial aerospace demand remains firm.
Best idea EDAC Tech (EDAC) reported strong fiscal 2012 first-quarter results Wednesday. We are raising our fair value estimate on the aerospace component supplier to $23 per share (was $15) as a result of a slightly lower discount rate in our cash-flow model, higher growth and profitability assumptions, and continued confidence in the recognition of the company’s burgeoning backlog, which now is roughly 3 times its annual run rate of sales. The shares are currently trading just above $13 each. << About our Best Ideas Newsletter EDAC Tech’s revenue advanced 19% to a record $24 million in the quarter, blowing by management’s conservative high-single-digit guidance offered in its previous report (and our low teens estimate). Net income more than tripled … Read more
Alcoa kicked off first-quarter earnings season with a solid report. Despite views that first-quarter earnings growth will be meager and almost negligible absent Apple (AAPL), we strongly disagree. We expect continued strong performance out of the cyclical aerospace sector coupled with improving earnings from the energy firms levered to oil. Alcoa, for example, posted $0.09 in earnings per share during the period versus consensus expectations of a $0.04 per share loss. But we had been expecting the earnings beat from the aluminum giant, and our fair value estimate for Alcoa remains unchanged following the report. We view Alcoa’s report more important for interpreting how certain end markets are performing than anything else. With that said, Alcoa reported year-over-year revenue growth … Read more
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Best idea EDAC Technologies (EDAC) reported fantastic fiscal fourth-quarter results Wednesday that showed significant earnings improvement and backlog growth. We are increasing our fair value estimate for the aerospace component supplier to $15 per share (from $10) on the basis of stronger profitability over the intermediate term than previously expected. The firm’s fourth-quarter sales jumped 27% from the same period a year ago, while net income per share came in at $0.21 per share versus roughly break-even in last year’s quarter. Sales for its AERO product line advanced 30%, while revenue for its Machine Tool product line increased at a similar pace. We continue to anticipate increased levels of sales in coming years thanks to an acceleration of commercial deliveries at … Read more
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