Precision Cast has parts that are in demand

Posted Jan 31st 2008 6:09PM by Joseph Lazzaro
Filed under: Stocks to Buy

When the market displays erratic behavior continually, go with the known. Think established companies. In industrial sectors. Think: Precision Cast Parts.

Precision Castparts Corp. (NYSE: PCP) is a leading manufacturer of investment castings used in aerospace and power generation applications, with products that include jet engine parts, fluid management valves, and deep hole boring tools.

Analysts like PCP's strong position in the jet engine and power generation markets, cost controls, and margins.

Further, analysts believe strong demand from aerospace engine manufacturers and aftermarket parts makers will drive impressive revenue growth for a considerable period. In addition, management's ability to translate top-line growth into bottom-line results fills out the picture. The Reuters FY 2007/FY 2008 EPS consensus estimates for PCP are $6.87 to $8.15.

The risks? Obviously, a slowdown in either the aerospace or gas turbine demand sectors or an inability to integrate recent acquisitions would hurt Precision's results.

The First Call mean rating for PCP is: Buy [16 firms]. Mean 2008 target: $151.00 [high: $190, low: $99].

Stock Analysis: Precision Cast Parts is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from PCP's shares. Sell/Stop Loss if you were to purchase shares in this company: $67.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: AerospaceSector, PCP, power generation, Precision Cast Parts