3 Aerospace/Defense Stocks Pushing Industry Growth

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 88 points (0.5%) at 16,582 as of Monday, Aug. 4, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 1,528 issues advancing vs. 1,497 declining with 145 unchanged.

The Aerospace/Defense industry as a whole closed the day up 0.1% versus the S&P 500, which was up 0.9%. Top gainers within the Aerospace/Defense industry included Tel Instrument Electronics ( TIK), up 2.8%, Acorn Energy ( ACFN), up 2.0%, Ducommun ( DCO), up 2.4% and Frontline ( FRO), up 1.7%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Frontline ( FRO) is one of the companies that pushed the Aerospace/Defense industry higher today. Frontline was up $0.04 (1.7%) to $2.42 on light volume. Throughout the day, 339,797 shares of Frontline exchanged hands as compared to its average daily volume of 946,200 shares. The stock ranged in a price between $2.32-$2.43 after having opened the day at $2.37 as compared to the previous trading day's close of $2.38.

Frontline Ltd., through its subsidiaries, is engaged in the ownership and operation of oil tankers and oil/bulk/ore carriers. The company provides seaborne transportation of crude oil and oil products, as well as raw materials, such as coal and iron ore. Frontline has a market cap of $226.2 million and is part of the industrial goods sector. Shares are down 36.4% year-to-date as of the close of trading on Friday. Currently there are no analysts who rate Frontline a buy, 1 analyst rates it a sell, and 3 rate it a hold.

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TheStreet Ratings rates Frontline as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from TheStreet Ratings analysis on FRO go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, FRONTLINE LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for FRONTLINE LTD is currently lower than what is desirable, coming in at 31.31%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, FRO's net profit margin of -7.10% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio is very high at 1231.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, FRO's quick ratio is somewhat strong at 1.36, demonstrating the ability to handle short-term liquidity needs.
  • FRO has underperformed the S&P 500 Index, declining 8.02% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • FRONTLINE LTD has improved earnings per share by 43.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FRONTLINE LTD reported poor results of -$2.38 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings (-$0.59 versus -$2.38).

You can view the full analysis from the report here: Frontline Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, Ducommun ( DCO) was up $0.65 (2.4%) to $28.10 on heavy volume. Throughout the day, 236,315 shares of Ducommun exchanged hands as compared to its average daily volume of 49,400 shares. The stock ranged in a price between $27.45-$28.46 after having opened the day at $27.87 as compared to the previous trading day's close of $27.45.

Ducommun Incorporated provides engineering and manufacturing products and services primarily to the aerospace, defense, industrial, natural resources, medical, and other industries. It operates through two segments, Ducommun LaBarge Technologies (DLT) and Ducommun Aerostructures (DAS). Ducommun has a market cap of $301.3 million and is part of the industrial goods sector. Shares are down 7.9% year-to-date as of the close of trading on Friday. Currently there are 4 analysts who rate Ducommun a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Ducommun as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, generally higher debt management risk and poor profit margins.

Highlights from TheStreet Ratings analysis on DCO go as follows:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 17.6% when compared to the same quarter one year prior, going from $5.50 million to $6.47 million.
  • Net operating cash flow has significantly increased by 93.18% to $25.24 million when compared to the same quarter last year. In addition, DUCOMMUN INC has also vastly surpassed the industry average cash flow growth rate of -24.85%.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The debt-to-equity ratio of 1.26 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, DCO's quick ratio is somewhat strong at 1.46, demonstrating the ability to handle short-term liquidity needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Aerospace & Defense industry and the overall market, DUCOMMUN INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

You can view the full analysis from the report here: Ducommun Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Acorn Energy ( ACFN) was another company that pushed the Aerospace/Defense industry higher today. Acorn Energy was up $0.04 (2.0%) to $2.07 on light volume. Throughout the day, 84,791 shares of Acorn Energy exchanged hands as compared to its average daily volume of 465,500 shares. The stock ranged in a price between $2.03-$2.11 after having opened the day at $2.03 as compared to the previous trading day's close of $2.03.

Acorn Energy, Inc., through its subsidiaries, provides technology driven solutions for energy infrastructure asset management worldwide. It offers oil and gas sensor systems, a fiber optic sensing system for the energy, commercial security, and defense markets. Acorn Energy has a market cap of $47.7 million and is part of the industrial goods sector. Shares are down 50.1% year-to-date as of the close of trading on Friday. Currently there is 1 analyst who rates Acorn Energy a buy, no analysts rate it a sell, and 1 rates it a hold.

TheStreet Ratings rates Acorn Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on ACFN go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, ACORN ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ACORN ENERGY INC is currently lower than what is desirable, coming in at 34.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -96.63% is significantly below that of the industry average.
  • ACFN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 75.24%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The revenue fell significantly faster than the industry average of 9.7%. Since the same quarter one year prior, revenues fell by 22.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • ACORN ENERGY INC has improved earnings per share by 32.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ACORN ENERGY INC reported poor results of -$1.60 versus -$0.94 in the prior year. This year, the market expects an improvement in earnings (-$0.54 versus -$1.60).

You can view the full analysis from the report here: Acorn Energy Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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