With the aid of the CAPS Community Stock Screener, I narrowed down a list of 40 aerospace/defense companies to just five top-performing entities with healthy balance sheets. The first parameter was that the stocks must be mid-capitalization, or between $1 billion and $10 billion in market value. This alone helped to reduce the list to 24 entities.
Additional criteria included a long-term debt-to-equity ratio less than 1.0; a revenue growth rate (last three yrs) of greater than 5% annually; EPS growth rate (last three yrs) greater than 5%; and a Price-to-Earnings (trailing-12 months) of between 10.0 and 20.0.
First, lets have a look at the key metrics
Symbol | Company Name | Market Capitalization | LT Debt-to-Equity Ratio | Rev. Growth Rate (last 3 Yrs) | EPS Growth Rate (last 3 Yrs) | Price-to-Earnings (TTM) |
---|---|---|---|---|---|---|
KAMN | Kaman (NYSE:KAMN) Corporation | $1.03 billion | 0.7 | 10.57 | 19.12 | 19.3 |
MOG-A | Moog, Inc. | $2.36 billion | 0.52 | 6.56 | 12.88 | 17.7 |
TDY | Teledyne Technologies Inc (NYSE:TDY) | $3.02 billion | 0.59 | 8.97 | 10.89 | 17.7 |
TXT | Textron Inc (NYSE:TXT) | $7.76 billion | 0.96 | 5.36 | 230.66 | 15.1 |
TGI | Triumph (NYSE:TGI) Group, Inc. | $4.09 billion | 0.58 | 30.91 | 36.19 | 13.9 |
Industrial and aerospace firm on a growth path
The first company to pass the screen is Kaman Corporation (NYSE:KAMN), a firm that attributes 64% of its 2012 sales to a “distribution” segment, and the remainder to aerospace. The former division is composed of power transmission/motor control-related products for industrial applications, while the latter produces a range of aerospace, helicopter, and military components for major manufacturers, as well as defense agencies.
Kaman Corporation (NYSE:KAMN) is notable for exceptional three-year revenue and earnings growth averages, both in the double digits. The EPS trend persisted in the recent June quarter, when share net was $0.66 versus last year’s $0.61.
Sales in its distribution business are benefiting from acquisitions, and profitability of these buyouts should thus ramp up going forward. Meantime, aerospace results are gaining steam behind a military program, while commercial-related sales are slowing a bit, and thus lagging the broader industry. Overall, sales and earnings should climb at a solid rate in subsequent quarters.
Accordingly, the shares, trading at a forward P/E of 14.0, offer upside potential.
Control-system maker positioning itself for 2014
Moog Inc (NYSE:MOG.A) produces aircraft controls (39% of 2012 sales); industrial systems (26%); components (15%); space and defense controls (15%); and medical devices (5%). Its customers include many of the largest aerospace and industrial entities, such as United Technologies, Parker-Hannifin, Danaher, and Siemens.