Defense Stocks Aren't Guaranteed: 5 Of 2014's Worst
Like other sectors, defense stocks have seen their share of winners and losers this year.
Five of the worst performers in the sector since the beginning of the year are:
- B/E Aerospace Inc (NASDAQ: BEAV)
- DigitalGlobe Inc (NYSE:DGI)
- Heico Corp (NYSE: HEI)
- Sturm, Ruger & Company (NYSE: RGR)
- Triumph Group Inc (NYSE: TGI)
Of these, only DigitalGlobe has shown any signs of trying to recover in the past 90 days, while B/E Aerospace and Sturm, Ruger have continued to be among the worst performers in defense in that time. More interestingly, shares of each are trading closer to their 52-week lows than their 52-week highs.
So what do analysts expect going forward?
This Florida-based company, known for its airline seats, posted better-than-expected earnings results last week. Its market capitalization is less than $8 billion and its long-term earnings per share (EPS) growth forecast is more than 19 percent.
The operating margin is better than the industry average.
Fifteen of the 19 analysts surveyed by Thomson/First Call recommend buying shares, with five of them rating the stock as a Strong Buy. They see about 25 percent upside potential. The share price is up almost 7 percent from the 52-week low earlier this month, but still down more than 14 percent year-to-date.
Satellite imagery, meanwhile, is the focus of this Colorado-based company.
Of particular note is DigitalGlobe's price-to-earnings ratio: It's much greater than the industry average, and short interest is more than 10 percent of float. Of the ten analysts polled, seven recommend buying shares, and their mean price target indicates around 20 percent upside is possible.
Shares plunged in February on soft guidance and news of acquisition, but have not yet recovered. DigitalGlobe's stock price is almost 30 percent lower than it was at the beginning of 2014.
This aerospace parts and services supplier is forecast to post strong growth on the top and bottom lines this year and next.
Heico's long-term EPS growth forecast is more than 15 percent and its return on equity is almost 19 percent.
For at least three months, the consensus analyst recommendation has been to buy Heico shares, and a move to their mean price target would be a gain of more than 17 percent. Year-to-date, shares are down more than 14 percent, and they reached a 52-week low earlier in October.
This Connecticut-based firearms manufacturer recently missed Wall Street's earnings expectations.
Sturm, Ruger's operating margin is higher than its industry average, and return of equity is more than 55 percent. However, none of the three surveyed analysts recommend buying shares, and they see no upside potential at this time.
The company's share price is more than 9 percent higher than the 52-week low from early October, but it is still down about 32 percent year-to-date, underperforming Smith & Wesson in that time.
This Pennsylvania-based aerospace company announced the acquisition of a leading provider of aviation maintenance and repair services recently.
Of the 17 analysts surveyed, 11 recommend buying shares.
An upside potential of more than 20 percent is indicated by their mean price target. Triumph's stock price is up less than 5 percent from a recent 52-week low, but still almost 18 percent lower than it was at the beginning of the year.
At the time of this writing, the author had no position in the mentioned equities.
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