Morgan Stanley Initiating PCP At Equal-Weight

Morgan Stanley is initiating coverage of Precision Castparts Corp. PCP at Equal-weight.

“PCP is one of the most levered players to the aerospace upcycle, with double-digit revenue growth FY11-13 atop industry-leading margins driving 14-17% EPS growth over the next couple of years,” Morgan Stanley writes.

“PCP's strong balance sheet and best in class management drive confidence in both sustainability of excellent organic performance and the potential for continued accretive deals, in our view. However, these positives appear broadly appreciated considering the 1.5-2.0x turn premium on 2012e P/E vs. peers.

“We are $0.24 below Street in FY12 and $0.52 lower in FY13, chiefly on lower assumed 787 deliveries vs. guidance. Each 787 translates to almost $0.01/share; we project a slower ramp.”

Precision Castparts Corp. closed Thursday at $140.25.