Will This Downgrade Hurt Wesco Aircraft Holdings (WAIR) Stock On Monday?

NEW YORK (TheStreet) -- Wesco Aircraft Holdings Inc. (WAIR) was downgraded to "neutral" from "overweight" at JP Morgan (JPM) on Monday.

The firm said it lowered its rating for the holding company for Wesco Aircraft Hardware Corp. based on a valuation call and concern the base business will miss expectations during the next few quarters.

JP Morgan lowered its price target on Wesco to $22 from $24.

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TheStreet Ratings team rates WESCO AIRCRAFT HOLDINGS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate WESCO AIRCRAFT HOLDINGS INC (WAIR) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 6.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 31.57% and other important driving factors, this stock has surged by 47.46% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WAIR should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WESCO AIRCRAFT HOLDINGS INC has improved earnings per share by 31.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WESCO AIRCRAFT HOLDINGS INC increased its bottom line by earning $1.09 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $1.09).
  • WAIR's debt-to-equity ratio of 0.64 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that WAIR's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.94 is high and demonstrates strong liquidity.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Transportation Infrastructure industry and the overall market on the basis of return on equity, WESCO AIRCRAFT HOLDINGS INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • You can view the full analysis from the report here: WAIR Ratings Report
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