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

January 07, 2008

January 8, 2008: Can Goodrich keep flying high?

Picture: Now I know Goodrich actually DID build a few.

I remember being confused by thinking the Goodyear blimp was the Goodrich blimp. Such are benign errors of youth. During the conglomerate era, both companies drifted into areas other than tires. Goodyear had to divest all of its non-core ventures and debt itself to the hilt to avoid a takeover by Sir James Goldsmith in the 1980s.
Goodrich did the opposite, gradually transforming itself from a tire company in Akron, Ohio to a leading aero-space entity based in Charlotte, North Carolina.

Recently, Goodrich Corporation (GR) stock has been beaten down by a few analysts primarily due to a perceived weakening of the larger commercial aircraft market beginning in 2010 and the opinion that over performance of Goodrich in 2007 could not be replicated in 2008. I believe that although the predictions of aircraft production slowdowns around 2010 may well occur, Goodrich has anticipated this possibility and has adjusted its components to take advantage of aircraft retrofit and maintenance, and to increase its opportunities in the defense industry. From aerostructures and actuation systems to landing gear, engine control systems, sensors and safety systems, Goodrich products are on almost every aircraft in the world, new and old.

A few days ago, Goodrich again showed its expertise in high margin products by being awarded a Defense Advanced Projects Agency (DARPA) contract to develop next-generation night vision sensor technology for helmet mounted and vehicle mounted applications.

Importantly, Goodrich has decided to proceed with a plan to disperse appropriate operations (aircraft parts, general production facilities, etc.) to low cost providers around the world.

And most significantly, Goodrich is taking its large and growing aircraft maintenance and retrofit operations worldwide. Recently, Goodrich announced that it will build a huge world-class facility in Dubai, slated to be one of the busiest aircraft hubs in the world in a few years.

Goodrich stock is down from the mid-70s in December to its close today at $65.80. The dividend at approximately 1.35% rests alongside a pe of 18.1. I believe that the current stock price represents a buying opportunity to own an evolving yet focused company with anticipatory management at an attractive price.

Analysts downgrading the stock because of an anticipated slowdown for new aircraft sales seem to be missing a large part of the Goodrich story.

DISCLOSURE: I have owned Goodrich (GR) since 2002 in my Permanent Portfolio.

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