Today Dow Theory Forecasts Editor Richard Moroney recommends a growth stock that may benefit from the ongoing swing away from defensive names in occurring in the market.
“B/E Aerospace, Inc. (BEAV, Nasdaq) equips the cabins of commercial and business jets with electrical components, fasteners, lavatories and even coffee makers. Growth in passenger air traffic is trending above last year’s rate, supporting demand for more new planes and potentially triggering a rebound in the airline parts aftermarket. The airline industry’s shift toward wide-body planes could also give B/E a boost. Compared to narrower aircraft, wide-body planes tend to require six to 10 times the dollar value of content for the type of products that B/E manufactures.
“B/E shares are not cheap at 20 times trailing earnings, a 30% premium to their five-year average and 21% above the median for S&P 1500 industrial stocks. But the stock’s valuation reached similar levels last year, and the P/E topped 24 in both 2010 and 2011. Moreover, rising analyst estimates project profit growth of 23% for the June quarter and 19% for the September quarter. B/E has topped the consensus profit estimate in at least 28 straight quarters, with shares rallying on the results in six of the last seven quarters. B/E Aerospace is a Focus List Buy and a Long-Term Buy.”
Richard J. Moroney, CFA, Dow Theory Forecasts, www.dowtheory.com, 800-233-5920, 6/17/13