Kaman Corporation (KAMN), Moog Inc (MOG.A): 5 Top Mid-Cap Aerospace/Defense Stocks to Consider

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.

Kaman Corporation (NYSE:KAMN)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.