Esterline Technologies Corp.'s share rose in trading Monday after a Credit Suisse analyst upgraded her rating on the aerospace and defense supplier, seeing growth opportunities ahead.
THE SPARK: Credit Suisse analyst Julie Yates Stewart upgraded her rating on Esterline from "Neutral" to "Outperform", saying in a research note that the company could have a number of contract opportunities coming up soon.
Esterline, which makes parts for commercial airliners and military planes, is subject to the volatility of the various industries it works with. But Stewart noted that there are a number of military and commercial projects expected to come up soon that could benefit Esterline.
The analyst also said she doubts the credence of some rumors last month that the company could be a takeover target. However, she noted that the company could attract interest as merger-and-acquisitions activity in the sector picks up.
THE BIG PICTURE: There was a lot of speculation in March that the company was a takeover target.
The Daily Mail in London reported that BAE Systems, Boeing and Lockheed Martin could be looking at the Bellevue, Wash., company. The Guardian newspaper also reported that traders indicated BAE may be looking at the company.
THE ANALYSIS: Stewart said she liked the company's mix of revenue: about 45 percent of its sales are in commercial aerospace business, 40 percent in defense and the remainder is a mix of other clients. She expects the company will likely add new business, improve its margins and soon see the benefit of last year's acquisition of Souriau, a connectors company.
She increased her target price on Esterline shares to $81 from $69.
SHARE ACTION: Shares of Esterline rose $1.12 to close at $68.05. The stock has traded between $47.48 and $82.28 in the past 52 weeks.