The company is marked by steady revenue and earnings advances, along with a low debt-to-equity ratio. It appears to be riding the commercial aerospace boom to higher sales again this year, as it achieved a 10% top-line gain in the June quarter.
Next year, a strong pace of earnings increases ought to resume, as Moog Inc (NYSE:MOG.A) should see benefits from its restructuring, along with ongoing sales improvements. In fact, management is guiding toward a 23% EPS jump in 2014.
Thus, the shares might well have additional capital gains potential as a growth holding. The forward P/E is 16.9.
Expanding horizons
The third company, Teledyne Technologies Incorporated (NYSE:TDY), is boosting its presence in markets such as marine and test instrumentation, as well as environmental by way of its instrumentation division. That unit contributed 35% of 2012 sales, while other segments, aerospace and defense electronics (31%), digital imaging (20%), and engineered systems (14%) rounded out the balance.
Certainly, Teledyne Technologies Incorporated (NYSE:TDY) is generating robust revenue increases, in excess of its 9% three-year average. Along with the strength in instrumentation, its second-largest business unit, that being aerospace and defense related, is also experiencing sales gains.
Profitability ought to improve thanks to the integration of acquisitions and cost containment measures. If conditions remain favorable, consistent share-net growth should persist.
Teledyne Technologies Incorporated (NYSE:TDY) shares are trading at a forward P/E of 16.1 and are a good choice for momentum-based investors.
Multi-pronged manufacturer likely to turn around
Another that passed the screen is Textron Inc. (NYSE:TXT), a company operating across five operating segments: Bell, a helicopter maker contributed 35% of 2012 sales; Cessna, a business jet producer, provided 25%; industrial contributed 24%; Textron Systems provided 14%; and finance provided 2%.
Textron Inc. (NYSE:TXT)’s monstrous rate of share earnings growth since 2010 has stemmed from gains at Bell and Cessna, as well as the stabilization of the finance unit through loan write-offs. This year, its other two businesses, industrial and systems, are performing better in terms of sales.
Over the long haul, pickups in demand for commercial and military helicopters, as well as business jets, would support profit gains. Like several other companies mentioned here, industrial acquisitions should also be a growth driver (industrial categories include fuel systems, golf carts, and power tools, a diversified group).
Therefore, investors might want to seize the current price-weakness opportunity to purchase the shares for the long term.
Consolidator poised for growth
I have mentioned Triumph Group Inc (NYSE:TGI) in a prior blog, “More Aerospace Stocks With Upside.” Its business segments are: aerostructures, including components, contributing 75% of 2012 sales; aerospace systems (17%); and aftermarket services (8%).
Outstanding revenue and earnings growth averages of better than 30% over the past three years are a key aspect of Triumph Group Inc (NYSE:TGI). Acquisitions, particularly in its aerospace business, are fueling ongoing rapid sales growth. Share-earnings gains should start to pick up as buyouts are integrated.
Thus, the positive momentum is apt to persist for Triumph. It is on pace for earnings per share of around $6.40 this fiscal year (ends in March).
The shares’ forward P/E ratio is currently only 10.9, and investors may be rewarded as the company’s expansion bolsters profits in subsequent years.
Summary
The five best mid-cap aerospace/defense stocks according to this screen are those discussed above. Commercial-aerospace companies have largely been performing well this year, and could possibly have further upside. On that note, a continued pickup in defense-related business may help these companies’ shares, too.
The article 5 Top Mid-Cap Aerospace/Defense Stocks to Consider originally appeared on Fool.com and is written by Damon Churchwell.
Damon Churchwell has no position in any stocks mentioned. The Motley Fool owns shares of Moog and Textron. Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
