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The Zacks Analyst Blog Highlights: HEICO, Astronics, Curtiss-Wright, Teledyne and Wesco

Zacks Equity Research

For Immediate Release

Chicago, IL –June 12, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: HEICO Corp. HEI, Astronics Corp. ATRO, Curtiss-Wright Corp. CW, Teledyne Technologies TDY and Wesco Aircraft Holdings, Inc. WAIR.

Here are highlights from Tuesday’s Analyst Blog:

5 Defense Stocks to Gain from United Tech-Raytheon Merger

Defense stocks moved higher on Jun 10 after United Technologies and Raytheon agreed to merge. The new entity is expected to generate annual sales of around $74 billion. Further, it will become the second-largest U.S. aerospace and defense company after Boeing once the merger is completed in 2020. This is only the most-recent such agreement for a space witnessing a spate of deals.

In fact, defense stocks have emerged as power-packed performers this year. An end to budget sequestration has proven to be beneficial for the sector. With defense spending likely to remain high even if a change of guard takes place at the White House, it makes sense to add select defense stocks to your portfolio at this point.

United Technologies-Raytheon Deal Extends Spate of Mergers

Following the completion of the merger, the new entity, slated to be called Raytheon Technologies Corp will be valued at around $100 billion. This is significantly lower than the two companies’ combined market value of $166 billion, since it takes into account planned spinoffs. The deal will be completed in the first half of 2020 once United Technologies hives off its Carrier climate control and Otis elevator businesses. 

But the merger of United Technologies and Raytheon is only the latest for a sector, which has been witnessing furious M&A activity. Last year, United Technologies bought Rockwell Collins for $30 billion in its quest to become a pure-play aerospace and defense stock. Further, Northrop Grumman decided to acquire Orbital ATK for $9.2 billion while Harris and L3 merged in a deal valued at $33.5 billion.

Defense Among the Hottest Plays for 2019

As of Jun 10, the S&P 500 Aerospace and Defense sector was up 23% year to date, taking into account dividends reinvested. In contrast, the broader S&P 500 has gained 16% over the same period. The sector has outperformed the broader index on a dividends reinvested basis over the last five, 10 and 15 years.

The reasons for this pattern are not so mysterious. Commercial air travel is a terrific long-term bet since its growth remains robust and largely unhindered. And defense spending is likely to remain substantial regardless of who controls the Congress or White House. The sector has received a strong boost ever since the end of sequestration in 2015, a factor which had weighed on sales growth of the sector for quite some time.

In fact, President Trump has announced a substantial defense budget proposal of $750 billion for 2020. The Republican-controlled Senate is likely to approve of this proposal. And while the Democrat-heavy Senate will certainly press for a reduction, the final figure is likely to remain significantly large. The House Armed Services Committee is discussing a proposal of around $733 billion. 

Our Choices

The United Technologies-Raytheon merger is the latest entrant in the series of M&A deals the aerospace and defense sector is witnessing. Such activity is unlikely to die down soon given that defense remains an attractive space following the end of budget sequestration in 2015.

Investing in select defense stocks looks prudent at this point. We have narrowed our search to the following stocks based on a good Zacks Rank and other relevant metrics.

HEICO Corp. is a designer, manufacturer and seller of defense, aerospace and electronic related products and services.

HEICO Corp flaunts a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth for the current year is 22.5%. The Zacks Consensus Estimate for current-year earnings has moved 3.8% north over the past 30 days.

Astronics Corp. is a designer and manufacturer of aerospace, defense and electronic products.

Astronics’s expected earnings growth for the current year is 35.8%. The Zacks Consensus Estimate for current-year earnings has improved 17.1% over the past 30 days. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Curtiss-Wright Corp. is a diversified multinational company that designs, manufactures and overhauls precision components.

Curtiss-Wright has a Zacks Rank #2 (Buy). The company’s expected earnings growth for the current year is 11.9%. The Zacks Consensus Estimate for current-year earnings has moved north by 3.4% over the past 30 days.

Teledyne Technologies is a provider of digital imaging, instrumentation, defense and aerospace electronics and engineered systems.

Teledyne has a Zacks Rank #2. The company has expected earnings growth of 6.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 1% over the past seven days.

Wesco Aircraft Holdings, Inc. and provides supply chain management services to the global aerospace industry.

Wesco Aircraft Holdings has a Zacks Rank #2. The company has expected earnings growth of 12% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 3.7% north over the past 60 days.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Wesco Aircraft Holdings, Inc. (WAIR) : Free Stock Analysis Report
Astronics Corporation (ATRO) : Free Stock Analysis Report
Curtiss-Wright Corporation (CW) : Free Stock Analysis Report
Heico Corporation (HEI) : Free Stock Analysis Report
Teledyne Technologies Incorporated (TDY) : Free Stock Analysis Report
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