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Edac Technologies Corp. Message Board

  • argyle46a argyle46a Dec 15, 2011 9:38 AM Flag

    Aerospace cycle: EDAC


    Another update on EDAC and it's resurgence during the current aerospace boom.

    1. The market is pricing EDAC for quarterly earnings of $0.12 eps.

    2. Last 2 quarters were $0.19 eps and next 2 quarters will easily meet/exceed this target. That means EDAC will likely go up 50% to $15/share by the end of April after Q1 2012 earnings just to reach proper valuation.

    3. This one is huge. EDAC has $92 Million in new contracts over 5 years with parts starting to be fully delivered by Q2 2012. Q4 2011 and Q1 2012 will see increased revenues from these contracts. Revenue will increase by approx $4.6 Million each and every quarter for the next 5 years! That means current revenues will rise from $21.8M quarterly to $26M, and margins should increase to around 19%. This will take EDAC's earnings to around $0.32 eps which takes EDAC's fairly valued stock price to $27/SHARE in 18 months!! This is without any additional contract wins! No cheerleading here, this is very honest math given public information recently communicated from the CEO.

    4. As good as all this sounds, it's only going to get better from years 2012-2018. This is due to revolutionary airplane technology that is only becoming available now. Almost every major airline and freight company are preparing to replace their aging fleets with new aircraft, especially because new airplanes being build are 15-20% more fuel efficient than recent models and some 35% more fuel efficient than older planes. Since jet fuel has risen from $0.80/gallon to $3.50/gallon over the last 11 years, airlines are desperate to replace their aging fleets with more fuel efficient models to save money on every flight and increase their profitability. I have never seen a stronger aerospace cycle than what we are currently experiencing in my entire life.

    5. EDAC has contracts to build parts for the hottest engines possible: Joint Strike Fighter (F-35), PurePower Geared Turbofan, LEAP-X engine, Boeing Dreamliner, ADVENT engine, IAE V2500 engine. This puts EDAC's products in demand as many of the recent planes being ordered from Boeing and Airbus use these engines or close variants.

    6. Here are a few recent examples of planes that use EDAC's parts that have been ordered that may cause EDAC to win additional contracts in the future:

    Dec 15, 2011L JetBlue Orders 40 Airbus A320neo Aircraft Worth $3.4 Billion (Uses PurePower engines)

    Dec 13 2011: Southwest Orders 208 Boeing 737 MAX ($19 Billion) - uses LEAP-X engine

    Dec 12, 2011: Lockheed gets $4B F-35 Contract (30 F-35 jets)

    Nov 18, 2011: Boeing Scores $21.7 Billion Order in Indonesia (201 Boeing 737 MAX, LEAP-X engine)

    Nov 15, 2011: Boeing Snares Record $18 Billion Order from Emirates Airlines (Boeing 777 which EDAC says it builds parts for)

    Sep 15, 2011: Air France Splits $12 Billion Order Between Airbus, Boeing (787 Dreamliner)

    These are just a few of the headlines showing the coming aerospace boom, there's many, many more. While Boeing should be a good investment over the next few years, EDAC will go up much faster, much higher than Boeing ever would due to it's tiny float and small market cap. While EDAC has gone up close to 200% in the past year, 2012 should see EDAC getting close to $20/share and continue to go higher as airline fleets are replaced globally.

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    • I was impressed by how many long term EDAC workers on the floor of their plant, positive feeling expressed for the company.

    • argyle,

      I agree with your take on things with EDAC. Since you follow EDAC more closely than I, I will run my concerns past you to hear your take:

      - Can EDAC handle the increasing business with their current facilities or will they need some big CapEx to expand.

      - Is there any obvious way for EDAC to improve their gross and net margins? Perhaps some sort of value-added design services, or test services, or ???

      - Insiders were buying aggressively in the 3 - $5 range but have sat on their wallets of late. Good news is they haven't sold any shares, but wish they would buy more.

      - Will EDAC spit out enough cash to decrease their net debt over the next couple quarters?

      Thank you.