Military
RBC Says 4 Aerospace and Defense Stocks Are Possible Takeover Targets
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It happens every year, and 2018 won’t be any different. Larger companies looking to add to growth in addition to that of the organic or internal variety scan the field for purchases and acquisitions that are easy to bolt on and could add returns in a timely fashion. This year the process may even speed up some as last month’s market sell-off already may have put some companies in the sights of acquirers.
In a yearly and all-encompassing report, the analysts at RBC go through every sector looking for possible takeover candidates. Last year the company’s screens yielded 20 that were eventually acquired over the following 12 months.
One screen that should be of interest to many investors is the potential buyout candidates in the aerospace and defense sector. With constant new innovations to increase weaponry and military readiness and capability, and the fact that the United States will continue to strive to continue to be the premier world power and defense and aerospace provider, it makes sense that larger companies in the sector would be looking to add new capabilities and technology.
We cross-referenced the RBC potential buyout candidates looking for the highest profile names and found four that like solid choices.
RBC is positive on this off-the-radar stock. AAR Corp. (NYSE: AIR) is a provider of services and products to the commercial aviation and government and defense markets. Its Aviation Services unit consists of supply chain and maintenance, repair and overhaul (MRO) activities, and the Expeditionary Services unit includes airlift and mobility activities.
The company’s services and products include aviation supply chain and parts support programs; MRO of aircraft and landing gear; design and manufacture of specialized pallets shelters and containers; expeditionary airlift services; aircraft modifications and aircraft and engine sales and leasing.
Investors receive just a 0.81% dividend. The Wall Street consensus target for the shares is $45.17. They closed Wednesday at $43.73, in a 52-week trading range of $32.01 to $45.60.
This multifaceted company could very well be a tempting target at its current valuation. Cubic Corp. (NYSE: CUB) designs, integrates and operates systems, products and services that provide situational awareness for its customers in the transportation and defense industries. The company operates in three business segments across the global transportation and defense markets: Cubic Transportation Systems, Cubic Global Defense and Cubic Global Defense Services.
The company recently announced its Cubic Transportation Systems division won the Transport Supplier of the Year award at the London Transport Awards for its relationship with Transport for London. Cubic and Transport for London have enjoyed one of the longest supplier relationships in the United Kingdom, spanning over three decades. Both companies have been continually paving the way for ground-breaking transport solutions.
The consensus price objective is $63.20, and shares closed above that level on Wednesday at $65.50. The 52-week trading range is $39.58 to $66.20.
This stock was hit hard back in November and offers investors a very good entry point. Esterline Technologies Corp. (NYSE: ESL) primarily serves the aerospace and defense market (approximately 80% of revenues). The remaining revenues are derived by applying the same technologies to the industrial market. The company divides its business into three segments: Avionics & Controls, Sensors & Systems and Advanced Materials.
The stock has been volatile on Wall Street concerns of defense programs that were sunsetting, but most are positive on the structural changes that have been made. While patience may be required, the stock looks tempting here.
The posted consensus price target is $80.20. Shares closed Wednesday at $76.70 and have a 52-week range of $67.15 to $102.70.
This company saw significant insider buying over the past few years. Wesco Aircraft Holdings Inc. (NASDAQ: WAIR) is one of the world’s largest distributors and providers of supply chain management services to the global aerospace industry. It was founded in 1953 as a dealer of scrap metal and hardware.
Wesco supplies more than 565,000 SKUs to over 7,000 customers with services ranging from distribution to outsourcing of procurement and stocking functions, management of vendor relationships, quality assurance, kitting, just-in-time delivery and point-of-use inventory management.
The consensus price objective is $8.06. The stock closed trading on Wednesday at $10.10. The 52-week range is $6.05 to $12.53.
While there is absolutely no guarantee that these aerospace and defense companies are acquired, they all are outstanding stocks to own in aggressive growth portfolios. The buyout factor just gives them another reason to be considered.
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