B/E Aerospace Inc (BEAV), Precision Castparts Corp. (PCP): Thursday’s Top Upgrades (and Downgrades)

Page 1 of 2

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines feature a pair of hikes to price target at aerospace parts suppliers B/E Aerospace Inc (NASDAQ:BEAV) and Precision Castparts Corp. (NYSE:PCP). But the news isn’t all good, so before we address those two, let’s start with why one analyst thinks…

B/E Aerospace Inc (NASDAQ:BEAV)

Cliffs could dive
In direct contradiction to the bullish note struck by analysts at BB&T Capital earlier this week (where analysts upgraded Cliffs Natural Resources Inc (NYSE:CLF) stock on news of its CEO’s departure) a different banker announced this morning that it’s not nearly so hot on the company’s chances. Disagreeing with BB&T’s analysis (but agreeing with my own), analysts at CIBC cut their rating on Cliffs Natural Resources Inc (NYSE:CLF) from sector perform to underperform.

Why might this be the right all, and BB&T’s endorsement of the stock the right one?

For the same reasons I outlined earlier in the week: Cliffs Natural Resources Inc (NYSE:CLF) is not a profitable company. It might turn profitable next year (or it might not). But even if it does, the 4% consensus earnings growth projections of the analysts simply aren’t strong enough to support the 10 times forward earnings valuation the share now carry. Not with Cliffs Natural Resources Inc (NYSE:CLF) burning through cash at the rate of $500 million a year. Not while it’s laden with $3.4 billion in net debt.

Based on these facts, CIBC is right to turn to be pessimistic.

Now for the good news
Turning now from iron to aluminum, titanium and carbon composites…  in contrast to CIBC’s bearish note on Cliffs Natural Resources Inc (NYSE:CLF), one analyst is taking a decidedly bullish note on the aerospace sector, and on the companies that supply parts to it in particular. In a note released to investors this morning, investment banker Sterne Agee argued that “pure-play aerospace companies should continue to benefit from production rate increases” in the current quarter.

Reviewing seven companies operating in the sector, Sterne highlighted five that it likes — and two that it likes a lot. Those two, from which the analyst says it expects to see “the most upside to our estimates,” are metal aircraft components manufacturer Precision Castparts Corp. (NYSE:PCP), and aircraft interiors specialist B/E Aerospace Inc (NASDAQ:BEAV). For each of these firms, Sterne sees “still plenty of runway left in cycle.” Let’s take them one at a time.

Precision Castparts
Sterne notes that Precision Castparts Corp. (NYSE:PCP) now has “a full quarter” revenues from its Timet acquisition now under its belt, and on its books. “Momentum is just commencing on the $30-$40 million of synergies expected over the next 12+ months,” says the analyst, as this has Sterne predicting the shares will hit $281 within 12 months.

Is such an 18.5% profit on the stock likely? I don’t think so, and I’ll tell you why.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!