B/E Aerospace Add To Focus List

3/4/2013


  Recent Price
$52
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
18
  Shares (millions)
103
  Long-Term Debt as % of Capital
49%
  52-Week Price Range
$54.33 - $36.51

B/E Aerospace ($52; BEAV) makes products for the cabins of commercial airplanes and business jets. The company has posted eight straight quarters of sales growth in excess of 20%, with operating profit margins steadily expanding.

At the end of 2012, B/E boasted a booked backlog of $3.75 billion, up 7%. Shares don't look particularly cheap at 18 times trailing earnings, above the peer-group median but 9% below B/E's three-year average. However, we expect B/E to continue its strong growth in the resurgent commercial-aerospace industry. B/E Aerospace, initiated as a Long-Term Buy in the Feb. 18 issue, is being added to the Buy List and Focus List.

Business breakdown

B/E draws 48% of revenue from North America, 25% from Europe, and the remainder from Asia, the Middle East, and emerging markets. Until recently, B/E Aerospace sold its interior products solely to airlines. But with Boeing's ($76; BA) Dreamliner and a forthcoming wide-body plane from Airbus, B/E has begun selling to jet manufacturers in the hope of increasing its share of products per vehicle. Last year, Boeing and Airbus combined to generate 14% of B/E's sales.

The commercial-aircraft segment (50% of 2012 sales, 50% of operating profit) sells seats, overhead-oxygen equipment, lavatory systems, coffee makers, ovens, and refrigerators. Operating profit margins have widened in each of the past three years, a trend B/E sees continuing. The segment gained market share last year, signing up new business while retaining all of its contracts that came up for renewal. Management says several international airlines plan to upgrade their cabins, work deferred during the financial crisis.

Consumables management (38%, 41%) is B/E's fastest-growing segment over the past five years, partly because of several acquisitions. The unit sells fasteners, bearings, hardware, chemicals, and electrical and lighting components.

B/E also furnishes business jets (12%, 10%) with many of the same equipment it sells for commercial aircraft, in addition to mini-bars, flat-screen TVs, and mood lighting.

In December, the International Air Transport Association lifted its 2013 profit projection for the global airline industry, projecting 25% growth in 2013. Both global passenger traffic and capacity are expected to rise 5% this year. Plane orders have also risen, especially for wide-body aircraft. Compared to narrower aircraft, wide-body planes tend to require six to 10 times the dollar-value content of the products B/E makes.

Since the beginning of 2008, B/E has paid a combined $2.16 billion for nine acquisitions in the fragmented industry. The company expects at least one or two deals this year.

For 2013, the company expects to grow earnings per share 22% to $3.45 on revenue of $3.35 billion, up 9%. B/E sees double-digit sales growth in 2014 and 2015. Should B/E meet its 2013 profit target and its P/E ratio hold at 18, the shares will rise 19% over the next year. An annual report for B/E Aerospace can be obtained at 1400 Corporate Center Way, Wellington, FL 33414; (561) 791-5000; www.beaerospace.com.

B/E AEROSPACE
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Dec '12
0.73
vs.
0.56
23%
49.50
-
41.41
18 - 15
Sep '12
0.77
vs.
0.64
21%
44.76
-
36.51
17 - 14
Jun '12
0.69
vs.
0.52
26%
48.24
-
39.68
20 - 17
Mar '12
0.67
vs.
0.49
25%
48.48
-
38.36
22 - 17
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2012
3.09
2.83
0.00
49.50
-
36.51
17 - 13
2011
2.50
2.24
0.00
42.85
-
28.83
19 - 13
2010
1.98
1.61
0.00
38.94
-
22.09
24 - 14
2009
1.94
1.45
0.00
24.29
-
6.32
17 - 4
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
92
86
58
89
49
87
71

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.
   NM Not Meaningful.


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