Esterline Technologies (NYSE: ESL) is
engaged in the design, manufacture, and marketing of engineered products and systems for application in the aerospace and defense industries. The Avionics & Controls unit makes communications systems, medical equipment, and interface systems for aircraft and military vehicles. The Sensors & Systems operation manufactures temperature and pressure sensors, as well as fluid and motion control products. The Advanced Materials segment makes elastomer products, combustible ammunition components and electronic warfare countermeasures. Boeing (NYSE: BA) is a major customer. Eaton Corporation (NYSE: ETN) is a competitor.
The company surprised investors late last month, when it reported Q1 EPS of $1.04 and revenues of $372.4 million. The Street had been expecting 59 cents and $342.3 million. The CEO noted that quarterly organic growth of nearly 25% was well balanced between the military and commercial businesses. Management also guided FY08 EPS to $3.35-$3.50, versus consensus of $3.17.
The share
price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with two "strong buys", three "buys" and three "holds". Analysts expect a 26% average annual growth rate, through the next five years. The ESL P/E ratio (12.63), Price to Sales ratio (1.09), Price to Book ratio (1.33), Price to Cash Flow ratio (8.82), Price to Free Cash Flow ratio (13.18), Sales Growth rate (44.78%) and EPS Growth rate (153.66%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $40.10 and $59.20. A stop-loss of $43.90 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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