Bought the XLS/wi yesterday at 10.50.
I believe this is a huge undervaluation.
Defense may not be a great idea overall but ITT has some great niche areas like night vision and jamming systems.
Have to look into this more deeply, like how much debt will XLS have?
If XLS stays this undervalued it will be snapped up quickly by RTN or some bigger defense company. I think $15 to $18 easy.
You are right and better wait and see with XLS.
First, earnings visibility needs to be clarified at this point in the defense cycle. I would wait a few quarters for that.
Second, the legacy obligations could probably absorb quite a bit of cashflow. How much should become clearer as time passes.
All-in-all, you are right to wait.
If you read the presentation that XLS made recently -- Oct 14, I think.
They have a number of financial obligations that will cut into EPS for a couple of years.
They have adjusted six-month 2011 earnings at around 85 cents.
So I figure that will equate to about $1.70 for all of 2011.
The ruth is that XLS has been saddled with a lot of financial baggage -- and I now realize that a lot of this was designed to avoid an early takeover.
Anyone else have thoughts on this?
The current defense business is earning about 3 dollars a share. Why do you think it will only make half that amount? They reported about 140 million in income attributed to defense last quarter. With around 180 million xls shares it seems like it is trading at about 3 or 4 times earnings
You're probably right about ITT (old) being the best buy. Unless you are looking for income.
XLS will pay a 40 cent annual dividend -- not bad for a $10 stock.
And I see earnings around $1.60-$1.70.
When they get out from under some of this financial baggage and the poison pill, XLS will almost certainly attract suitors -- for the longer term it is a steal.
At Schwab, I'm using XLS/WI for Defense (and XYL/WI for the water)
There are still details I am not aware of, like an EPS estimate.
(I think Defense contributes about 35 percent of ITT earnings, so the EPS might be in the $1.60-1.70 range (just guessing, which I do not like to do).
I am willing to buy XLS?WI now because no matter what the numbers are, this is a gem and will attract takeover interest right away,
Anybody that has some details on how the spin companies will be structured as to debt load, please feel free to add.