investingfromtheright

I am retired and take educated guesses on all things financial.

December 11, 2006

December 12, 2006: High Tech Defense/Commercial Air

Aero Defense continues to be a profitable sector to explore. At a recent conference, many aero defense firms are expecting a minimum of high single digit up to mid double digit earnings in 2007. Commercial aerospace companies uniformly presented a bullish outlook in the market until AT LEAST 2010-2011. Metals companies reported a strong outlook given by commercial aerospace with most expecting solid double digit topline growth.

Boeing (BA) looks great heading out at least three years. Recently, Lufthansa ordered 20 747-81s with an option for 20 more (5.75b) scheduled for delivery beginning in late 2009. Aeroflot is leasing 15 737-500s.

Meanwhile, Airbus research and development costs for the A350XWB are rising to 15.4b to accommodate additional light weight carbon composites and other energy saving features.
Boeing management must be enjoying grossly subsidized Airbus again screwing things up. Perhaps Airbus had better stick with paper machet...at least the French will buy into it.

ERJ received a bit of a jolt when JBLU delayed delivery of 32 ERJ-190s by four years due to slower than expected growth. I now think that ERJ should not be on your buy list. Too many "if's" with orders.

The United States Army is proposing to cut several large programs. As predicted, Iraq is going to be winding down by summer. Note that several of the program cuts will be from companies located in districts with Democrat elected representatives.
Thus, the Army may very well get more than it needs to avoid layoffs and political fallout. Democrats need a beholden constituency.

Armor Holdings (AH) won a 650m order for roadside bomb-proof trucks.
Lockheed Martin (LMT) won a 11.25b 25 year contract from the UK for MFTS.
General Dynamics (GD) and Northrup Grumman (NOC) received an unspecified award for a new satellite system program .
MDA may award Boeing a contract for a missile defense complex in Europe. Surprise, surprise...are the Europeaceatanyprice legions becoming a bit more aware of the reality of Iran and their minions?

Several multi-billion dollar contracts are being awarded in January. L-3 Communications (LLL), Force Protection, Inc. (FRPT) look likely to get a lion's share.
Take note of Force Protection,Inc. This company may be a nice addition to your portfolio.

Other interesting companies now include:

BEAerospace (BEAV)
Esterline Technologies (ESL)
Goodrich (GR)...my favorite for quite some time
Rolls-Royce (RR.L)
Rti International Metals (RTI)

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