This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cubic Rides Not One, But Two, Big Trends

NEW YORK ( TheStreet) -- Companies such as iPhone maker Apple (AAPL - Get Report) and search firm Google (GOOG) capture investors' attention because they do business in wildly growing markets. What happens when a company is tapped into two fast-growing fields?

Cubic Corp. (CUB - Get Report), a small-cap stock, is just such a company. San Diego, Calif.-based Cubic is benefiting from two trends: providing military products and services, particularly in the areas of training and communications, as well as developing, installing and, in many cases, operating the fare-collection systems of mass-transit systems for 40 major markets on five continents, including New York and Washington, D.C. While defense offerings account for about 70% of revenue, operating profits are split almost 50/50 between defense and mass transit.

The U.S. military has been undergoing a transformation from a Cold War-style, large-scale fighting regime to a more nimble, efficient force capable of effectively operating in a number of environments. Cubic offers both training services as well as virtual-training simulators, both of which directly address important needs of this transformation.

Additionally, communications and information systems has become ever more necessary for internal coordination and surveillance of enemy forces. In the most recent quarter, Cubic's training systems and communications division posted revenue gains of 51% and 45%, respectively, from a year earlier.

Mass-transit fare systems are also an attractive business. Higher gas prices have contributed to increased ridership in the U.S. Overseas, especially in Asia, rapid urbanization has been and will continue to be a trend. Mounting pollution problems combined with the low incomes of many new urbanites (i.e., those unable to afford a car), makes mass transit a necessity.

Finally, many existing mass-transit systems have old, outdated fare systems that are ill-suited for intermodal (rail, bus, ferry, etc.) regional-transportation systems, and provide authorities no way to track the patterns of ridership. Cubic's smart-card-based systems make paying fares fast, accurate and secure. They also track valuable data relating to ridership patterns, helping mass-transit divisions plan efficiently.

In the most recent quarter, Cubic's transportation division increased revenue 49%, and won a large new contract for Sydney, Australia. Cubic said this week that it won a contract with Karlsruhe, Germany, to create an Apple iPhone application to buy transit tickets. The city has almost 300,000 residents.

Cubic has competitive advantages. The firm started as a defense contractor and has had a working relationship with the Department of Defense for 60 years. Contracting favors incumbents with established relationships and good track records. While the volume of business will always ebb and flow with government-spending priorities, it is a pretty good bet that Cubic will win their share of contracts.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $109.27 0.00%
CUB $40.72 0.00%
FB $88.26 0.00%
GOOG $600.70 0.00%
TSLA $241.93 0.00%

Markets

Chart of I:DJI
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASDAQ 4,683.9190 -49.5780 -1.05%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs