Commercial Aerospace Continues Improving Fundamentals as Defense Faces Sequestration: A Wall Street Transcript Interview with Michael F. Ciarmoli, Equity Research Analyst at KeyBanc Capital Markets Inc.

Wall Street Transcript

67 WALL STREET, New York - May 28, 2013 - The Wall Street Transcript has just published its Industrial Equipment, Aerospace and Defense Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Commercial Aviation and Energy Expenditures - Industrial Restructuring - Emerging Markets Penetration - Heightened M&A Activity - Defense Budget Uncertainty - Capital Equipment Technology Investing

Companies include: Boeing Co. (BA), Lockheed Martin Corporation (LMT), BE Aerospace Inc. (BEAV), Triumph Group Inc. (TGI), Rockwell Collins Inc. (COL), Spirit AeroSystems Holdings In (SPR), Precision Castparts Corp. (PCP), TransDigm Group Incorporated (TDG), Alliant Techsystems Inc. (ATK), Orbital Sciences Corp. (ORB) and many more.

In the following excerpt from the Industrial Equipment, Aerospace and Defense Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Are there any particular names that stand to benefit the most from the new aircraft production?

Mr. Ciarmoli: We've been highlighting our top three ideas for 2013, all of which are "buy"-rated: B/E Aerospace (BEAV), Triumph Group (TGI) and Rockwell Collins (COL). We've tried to find companies that have significantly more exposure to the commercial aerospace build cycle; that is, Boeing, Airbus, Bombardier (BBD-A.TO) related revenues, and a lower mix of aftermarket revenues, which tend to be a little bit more shorter-cycle, unpredictable and do move with the general economy.

Many commercial aerospace companies do have content on military platforms, so we've tried to identify companies that have as little as possible exposure to the overall defense sector. The best case is B/E Aerospace. We've also talked a lot about Spirit AeroSystems (SPR), another "buy"-rated name, a commercial aerospace pure play basically leveraged solely to Boeing. But those are the big ideas that we've been pushing all year, and we continue to like those names. They have performed well year to date, and we expect them to continue to trend higher.

TWST: I was going to ask you what your favorite names are. Are there any others you would call attention to?

Mr. Ciarmoli: Within commercial aerospace, it would be those four. We also recently upgraded Precision Castparts (PCP) to "buy," probably one of the higher-quality management teams, one of the more unique and differentiated business models in the sector.

It's a larger-cap name, $27 billion market cap, but when we're looking at this mix of which companies are leveraged to the OE production cycle, we really do favor Precision Castparts' end-market profile: A lot of exposure to the Boeing 787, roughly $12 million of content, so as that platform begins to ramp up to 10 per month in the latter portion of 2013 and into 2014, we see...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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