NEW YORK (TheStreet) -- Deutsche Bank maintained its "buy" rating of the "new" B/E Aerospace (BEAV) with a price target of $66, down from $91, following the spin-off of the company's consumable management segment.
"We continue to see fundamentals of strong airline profitability and air traffic growth driving mid-to-high SD top-line growth alongside steady margin expansion," Deutsche Bank said.
Analysts said that the spin-off of KLX (KLXI) from the company makes for a much "cleaner story" for BEAV, as it becomes a pure-play to commercial aerospace with uniquely high exposure to commercial aerospace aftermarket, which comprises 40% of sales.
That exposure should help the company sustain its multiple even as new OEM production decelerates into 2017, analysts noted.
Additionally, following the divestiture of the consumables business, BEAV's cash flow conversion should improve from the 75% conversion of net income in 2015 toward 100% by 2017, Deutsche Bank said.
Shares of B/E Aerospace closed up 4.06% at $58.40 yesterday.
Separately, TheStreet Ratings team rates B/E AEROSPACE INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate B/E AEROSPACE INC (BEAV) a BUY. This is driven by multiple 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 robust revenue growth, growth in earnings per share, good cash flow from operations, increase in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.5%. Since the same quarter one year prior, revenues rose by 24.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- B/E AEROSPACE INC has improved earnings per share by 10.1% 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, B/E AEROSPACE INC increased its bottom line by earning $3.52 versus $2.27 in the prior year. This year, the market expects an improvement in earnings ($4.50 versus $3.52).
- Net operating cash flow has increased to $135.80 million or 23.45% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.92%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Aerospace & Defense industry average. The net income increased by 10.2% when compared to the same quarter one year prior, going from $92.70 million to $102.20 million.
- 37.07% is the gross profit margin for B/E AEROSPACE INC which we consider to be strong. Regardless of BEAV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BEAV's net profit margin of 9.27% compares favorably to the industry average.
- You can view the full analysis from the report here: BEAV Ratings Report