The aerospace/defense sector - and B/E Aerospace (BEAV) specifically - is entering the 'sweet spot' of this cycle. Commercial deliveries of new models have yet to start in right earnest, while deliveries of more mature models continue apace. Further, maintenance, repair and overhaul (MRO) of both commercial and military equipment is at a heightened level because of increased usage, which engenders a vibrant after-market.
BEAV has significant financial and operating restrictions in its debt instruments that may have an adverse effect on operations. Further, the company competes with a number of established companies, some of which have significantly greater financial, technological and marketing resources than it has. However, while robust levels of revenues and income are envisioned for BEAV over the rest of the decade, we believe that present market conditions render BEAV fairly-valued at current levels.
The average P/E for the aerospace industry is 16.7 as compared to 17.3 for BEAV. Given the projection for BEAV for fiscal 2008 of $2.30/share, and applying the average P/E of 16.7 would engender a price of $38.41. This would indicate that BEAV is currently fully valued, which would argue for a HOLD opinion at this point.
Read the full analyst report on BEAV.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.