Is B/E Aerospace Inc (BEAV) Set to Fly Higher?

Page 1 of 2

Commercial aerospace company B/E Aerospace Inc (NASDAQ:BEAV) delivered a pretty strong set of results recently. It raised guidance and served notice that its backlog of orders plus exposure to wide bodied aircraft deliveries is creating good growth opportunities in 2013. In summary, I like the stock and the trends within aerospace that it is exposed to. However, I consider it to be fairly valued and investors may want to wait for a dip before buying in.

B/E Aerospace Inc Flying High

In order to accelerate learning and avoid going over old ground I will note that I’ve previously discussed BEAV in a blog post linked here, and I would strongly recommend that readers take a look at a recent outline of the key trends in the commercial aerospace industry. The conclusion of the latter piece is that there is evidence to believe that the airlines’ performance within the economic cycle has become relatively better. If so then the companies that supply them (including BEAV) deserve a re-rating even if they still are cyclically aligned.

Turning back to BEAV specifically, here are its business segments and how it made money in 2012.

Its commercial aircraft operations increased revenues in the quarter by 13.9% with operating earnings up 17.9%. This is impressive stuff and reflects the strength of The Boeing Company (NYSE:BA) and Airbus delivery schedules. BEAV is a preferred seating supplier to both airlines and also sells cabin interiors and a range of products including food and drink equipment.

It also has a lavatory system designed initially for the Boeing 737, which is intended for retrofit for airlines. The system creates additional seating on the plane so it has obvious ROI appeal.  I suspect take-up has been lower than expected, but management stated in the conference call that they expect to receive an order ‘in the near future.’

There are a few key trends to look out for with this segment:

  • Governments are not subsidizing loss making airlines as they did before, so the weight of business has shifted somewhat towards new build rather than retro–fit. Older planes are being retired rather than kept going, but BEAV is forecasting a pick up in the aftermarket by 2014.
  • 61% of BEAV’s revenues were driven by new-build.
  • The trend towards wide bodied airplanes is greatly beneficial to BEAV.
  • The issues with the 787 Dreamliner could be a problem, but for now BEAV have been told to deliver as usual by Boeing.
  • A deal for the lavatory system would really kick-start BEAV’s activities at the airplane assembly and possibly open up new opportunities.
  • Retrofit LED lighting will also provide some growth.

So there are plenty of growth drivers alongside the traditional cyclicality within this segment.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

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!