"We believe Goodrich (NYSE: GR) offers investors the opportunity to capitalize on long-term growth in both the commercial aerospace and defense markets," says Standard & Poor's The Outlook.
The service, which awards the stock its highest 5-star rating, says, "S&P likes the aerospace & defense equipment outfit's long-term growth prospects and rates the shares strong buy." Here is their review.
"Goodrich is one of the world's largest providers of equipment, parts, and services to the large commercial, regional, business, and military jet markets. The company operates through three business segments: the Nacelles and Interior Systems segment; Actuation and Landing Systems; and Electronic Systems.
"We view Goodrich's aerospace business as well diversified. Goodrich projects very strong 2008 growth in sales to Boeing and Airbus (about 20% growth) and to the business jet and regional jet markets (about 13%), with strong growth in the commercial aftermarket (8% to 10%) and moderate growth in defense and space (5% to 8%).
"Furthermore, Goodrich has significant content on the new Boeing 787, for which Boeing has taken more than 800 orders to date. First delivery on the 787, which has been delayed, is due by the end of 2008. Goodrich also has content on the new superjumbo Airbus A380.
"In addition, we see growth in both air traffic and airline capacity helping to drive growth at Goodrich. Simply put, the more aircraft fly and the greater the size of the active fleet, the more replacement parts and overhaul services airlines need for their aircraft. Goodrich projects 4% to 5% volume growth for aftermarket parts and services.
"In defense and space, we continue to see good growth in the U.S. defense budget. Goodrich has good positions on the Black Hawk helicopter (being used heavily in Iraq) and the F-35 Joint Strike Fighter jet (the U.S.'s next-generation fighter jet, which is just entering production).
"In addition, Goodrich was recently selected by the Defense Advanced Projects Agency to develop next-generation helmet-mounted night-vision technology.
"We believe business execution at Goodrich over the past few years has been very strong. Overall, we see strong operational execution by Goodrich, with profit margins rising, return on invested capital high and increasing, and free cash flow expanding after a period of compression.
"Given our expectation of about 15% earnings-per-share growth over the next three years, we view the stock as attractive at current price levels.
"We believe the biggest risk to our recommendation and target price is a significant slowdown in global economic growth. Meanwhile, the stock carries Standard & Poor's highest investment recommendation of 5 STARS (strong buy). Our 12-month target price of $80 is based on a p-e ratio of 19 times our 2008 EPS estimate."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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