BE Aerospace Steady Amid Turbulence

Thursday, 16 Jun 2011 02:28 PM

By Mike Seemuth

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Anyone who has traveled on a commercial jet has probably been surrounded, on one flight or another, by products from BE Aerospace (BEAV). BE outfits the interiors of new jets and older models for most major airlines in North America, Europe, and the Asia-Pacific region. The Wellington, Fla. company is a leading manufacturer and distributor of aircraft consumable parts such as fasteners and a full line of furnishings and equipment for cabin interiors.

BE says that it is the world's leading manufacturer of commercial aircraft seats. The company also claims global leadership in its four other major product categories: aerospace fasteners, food and beverage equipment, oxygen delivery and storage systems, and cabin interior products for non-commercial aircraft.

Sales of fasteners are part of a larger consumable aircraft parts business at BE that encompasses sales of seals, bearings, wiring, and lighting. BE significantly expanded this business in 2008 when it acquired consumable aircraft parts distributor Honeywell International from Fortune 100 manufacturer Honeywell International (HON).

Risks abound in the financially volatile airline industry. In June, the International Air Transport Association predicted that the global airline industry would earn a profit of $4 billion this year, down sharply from its earlier profit estimate of $8.6 billion, citing the massive March 11 earthquake in Japan, social unrest in the Middle East and North Africa, and the sharp rise in oil prices this year.

But BE Aerospace has shown tolerance for turbulence. After a net loss in 2008 due largely to an asset-impairment charge related to acquisitions, BE earned slightly more than $140 million of net income in both 2009 and 2010. Revenue totaled $1.98 billion last year, up from $1.93 billion in 2009.

Shaking it off

The company in April raised its forecast of 2011 earnings per share by 5 cents to $2, which would compare with $1.44 in each of the last two years.

Amin Khoury, BE’s chief executive officer, said in a statement that "the global economy and global passenger traffic continued to recover, in spite of a number of challenges," in the first quarter, and that "our airline customers have responded rationally by carefully managing capacity and passing on cost increases in an orderly fashion."

Most stock analysts following BE had buy ratings on the stock as mid-year approached. Goldman Sachs in early June issued a favorable research opinion of BE stock, adding the stock to its conviction buy list with a $54 price target.

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