CAPSTONE-AEROSPACE DEMAND READY FOR TAKE OFF-100302

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      【出版时间及名称】：CAPSTONE-AEROSPACE DEMAND READY FOR TAKE OFF-100302
      【作者】：capstone
      【文件格式】：pdf
      【页数】：55
      【目录或简介】：
• We are initiating coverage of three companies in the Aerospace &
Defense industry, with a particular focus on a rebound in
aftermarket demand in the second half of 2010 and accelerating
into 2011. As such, we are initiating on TransDigm Inc. (TDG) with a BUY
rating and a $60 price target (based on 17x 2011 earnings), and Esterline
Technologies Corporation (ESL) with a BUY rating and a $54 price target
(based on a 14x 2011 earnings). We are also initiating coverage on Heico
Corporation (HEI) with a HOLD rating based on valuation with a $48 price
target (based 22x 2011 earnings).
• We put particular focus on companies with substantial exposure to
aftermarket demand, given our view that airline operator
fundamentals are improving, number of flights are poised to
increase, and inventory draw-downs have likely bottomed. After a
dismal 2009, worldwide flight miles will likely rebound in the back half of
2010, leading to a long awaited rebound in aftermarket demand. While we
expect growth in 2010 to be modest, and admittedly on the back of easy comps,
we expect stronger global growth in 2011 through 2013.
• OEM production will likely remain weak in 2010 and 2011, but we
do not expect any substantial production cuts as order backlogs at
Boeing and Airbus are at unusually high levels given the current
point in the cycle. We are focused on the 787 as a potential catalyst
headed into year-end. Although it appears Boeing will keep production of
its best-selling 737 family flat throughout the downturn, we expect backlog
weakness through 2011 and a similar scenario with the Airbus A320. As such,
we favor aftermarket over OEM suppliers at this stage in the cycle, but will
remain focused on progress of the 787 as it should eventually be a nice tailwind
to ESL.
• Strength in the defense market appears to be intact for 2010 and
2011, but we would not look to defense for much of a catalyst at
these historically high levels. With 2010 defense budgets locked in, and
the 2011 budget already submitted, we expect demand to continue to be
positive to earnings, albeit not the catalyst of the past few years. That said, we
would be more cautious beyond 2011 as the current administration will likely
look to defense to plug budget gaps going forward.

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关键词：Aerospace Capstone demand Space Ready For take demand Ready