3 Stocks Advancing The Aerospace/Defense Industry

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 30 points (0.2%) at 17,107 as of Tuesday, Aug. 26, 2014, 4:20 PM ET. The NYSE advances/declines ratio sits at 2,006 issues advancing vs. 1,020 declining with 179 unchanged.

The Aerospace/Defense industry as a whole closed the day up 0.3% versus the S&P 500, which was up 0.1%. Top gainers within the Aerospace/Defense industry included Sifco Industries ( SIF), up 1.8%, Acorn Energy ( ACFN), up 2.1%, Elbit Systems ( ESLT), up 2.6% and Ducommun ( DCO), up 4.3%.

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

Ducommun ( DCO) is one of the companies that pushed the Aerospace/Defense industry higher today. Ducommun was up $1.29 (4.3%) to $31.33 on heavy volume. Throughout the day, 115,840 shares of Ducommun exchanged hands as compared to its average daily volume of 63,900 shares. The stock ranged in a price between $30.16-$31.70 after having opened the day at $30.38 as compared to the previous trading day's close of $30.04.

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 $327.6 million and is part of the industrial goods sector. Shares are up 0.8% year-to-date as of the close of trading on Monday. Currently there are 3 analysts who rate Ducommun a buy, no analysts rate it a sell, and 1 rates it a hold.

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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 growth in earnings per share. 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 -19.68%.
  • DUCOMMUN INC has improved earnings per share by 15.7% 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, DUCOMMUN INC reported lower earnings of $0.86 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($1.91 versus $0.86).
  • 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

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At the close, Elbit Systems ( ESLT) was up $1.51 (2.6%) to $59.40 on average volume. Throughout the day, 11,746 shares of Elbit Systems exchanged hands as compared to its average daily volume of 15,600 shares. The stock ranged in a price between $58.68-$59.50 after having opened the day at $58.68 as compared to the previous trading day's close of $57.89.

Elbit Systems Ltd., a defense electronics company, designs, develops, manufactures, and integrates defense electronic systems and products worldwide. Elbit Systems has a market cap of $2.5 billion and is part of the industrial goods sector. Shares are down 3.5% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate Elbit Systems a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Elbit Systems as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from TheStreet Ratings analysis on ESLT go as follows:

  • Compared to its closing price of one year ago, ESLT's share price has jumped by 28.26%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ESLT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ELBIT SYSTEMS LTD's earnings per share declined by 10.4% 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, ELBIT SYSTEMS LTD increased its bottom line by earning $4.31 versus $3.98 in the prior year. This year, the market expects an improvement in earnings ($4.43 versus $4.31).
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
  • ESLT, with its decline in revenue, slightly underperformed the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 0.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

You can view the full analysis from the report here: Elbit Systems 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 (2.1%) to $1.96 on light volume. Throughout the day, 292,732 shares of Acorn Energy exchanged hands as compared to its average daily volume of 445,100 shares. The stock ranged in a price between $1.91-$2.04 after having opened the day at $1.95 as compared to the previous trading day's close of $1.92.

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 $41.3 million and is part of the industrial goods sector. Shares are down 54.3% year-to-date as of the close of trading on Monday. 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 68.33%, 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 8.8%. 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 (-$0.68 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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