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.