Esterline is a very high quality company focused primarily on aviation. Their biz model is mixed, with a split between military and commercial, new-build and retrofit. They just closed an acquisition that I thought was fully priced but a great fit.
The quarter was a bit weak and I think that estimates will come down slightly. While defense is obviously a concern, the company appears to be likely to maintain sales and profits there due to the ramping of programs. There is also some risk that the fiscal 2012 (beginning 11/1) could start weak. The company has an analyst day in two weeks but won't give 2012 guidance until reporting in December.
The estimates are going to come down a little after yesterday. I view the coming year as very low organic growth plus the acquired growth. The 2-year out consensus was about 6.15 and I see it coming down to about 6 or so, maybe slightly lower. Not sure about what the right multiple should be - was thinking 15, maybe 14. The company has higher free cash flow than net income (capex is below D&A). A year out I see the stock 84-90, and it looks like 68 buys the stock this morning. It's not the best entry, but it's ok. I think 65 would be a good entry (but not good enough for Top 20).
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