3 Stocks Raising The Aerospace/Defense Industry Higher

All three major indices are trading down today with the Dow Jones Industrial Average ( ^DJI) trading down 120.72 points (-0.7%) at 17,420 as of Thursday, Aug. 6, 2015, 4:20 PM ET. The NYSE advances/declines ratio sits at 1,245 issues advancing vs. 1,837 declining with 137 unchanged.

The Aerospace/Defense industry as a whole closed the day up 0.2% versus the S&P 500, which was down 0.8%. Top gainers within the Aerospace/Defense industry included CPI Aerostructures ( CVU), up 3.3%, LMI Aerospace ( LMIA), up 1.7%, Ducommun ( DCO), up 6.2%, Orbital ATK ( OA), up 6.9% and Huntington Ingalls Industries ( HII), up 4.4%.

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 $1.52 (6.2%) to $26.12 on heavy volume. Throughout the day, 124,252 shares of Ducommun exchanged hands as compared to its average daily volume of 81,500 shares. The stock ranged in a price between $24.31-$27.00 after having opened the day at $24.98 as compared to the previous trading day's close of $24.60.

Ducommun Incorporated provides engineering and manufacturing products and services primarily to the aerospace, defense, industrial, natural resources, medical, and other industries. The company operates in two segments, Ducommun LaBarge Technologies (DLT) and Ducommun Aerostructures (DAS). Ducommun has a market cap of $256.4 million and is part of the services sector. Shares are down 2.7% year-to-date as of the close of trading on Wednesday. Currently there are 2 analysts who rate Ducommun a buy, no analysts rate it a sell, and 3 rate 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 good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on DCO go as follows:

  • Net operating cash flow has significantly increased by 135.87% to $3.49 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 22.53%.
  • DCO, with its decline in revenue, slightly underperformed the industry average of 4.3%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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.
  • The gross profit margin for DUCOMMUN INC is rather low; currently it is at 19.47%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.14% trails that of the industry average.

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

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At the close, LMI Aerospace ( LMIA) was up $0.17 (1.7%) to $10.41 on light volume. Throughout the day, 35,827 shares of LMI Aerospace exchanged hands as compared to its average daily volume of 64,700 shares. The stock ranged in a price between $10.10-$10.50 after having opened the day at $10.16 as compared to the previous trading day's close of $10.24.

LMI Aerospace Inc. provides structural assemblies, kits and components, and design engineering services to the aerospace and defense markets in the United States. LMI Aerospace has a market cap of $137.7 million and is part of the services sector. Shares are down 27.4% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate LMI Aerospace a buy, no analysts rate it a sell, and 2 rate it a hold.

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TheStreet Ratings rates LMI Aerospace as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on LMIA go as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Aerospace & Defense industry. The net income has significantly decreased by 231.4% when compared to the same quarter one year ago, falling from -$0.44 million to -$1.47 million.
  • The gross profit margin for LMI AEROSPACE INC is rather low; currently it is at 23.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.58% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$9.28 million or 192.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.38 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, LMIA's quick ratio is somewhat strong at 1.37, demonstrating the ability to handle short-term liquidity needs.
  • The share price of LMI AEROSPACE INC has not done very well: it is down 23.62% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

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

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CPI Aerostructures ( CVU) was another company that pushed the Aerospace/Defense industry higher today. CPI Aerostructures was up $0.30 (3.3%) to $9.30 on heavy volume. Throughout the day, 18,709 shares of CPI Aerostructures exchanged hands as compared to its average daily volume of 9,000 shares. The stock ranged in a price between $9.02-$9.30 after having opened the day at $9.18 as compared to the previous trading day's close of $9.00.

CPI Aerostructures, Inc. engages in the contract production of structural aircraft parts for fixed wing aircraft and helicopters in the commercial and defense aerospace markets. CPI Aerostructures has a market cap of $78.8 million and is part of the services sector. Shares are down 11.8% year-to-date as of the close of trading on Wednesday. Currently there are 2 analysts who rate CPI Aerostructures a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates CPI Aerostructures as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from TheStreet Ratings analysis on CVU go as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Aerospace & Defense industry. The net income has significantly decreased by 46.3% when compared to the same quarter one year ago, falling from $1.73 million to $0.93 million.
  • 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 Aerospace & Defense industry and the overall market, CPI AEROSTRUCTURES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CPI AEROSTRUCTURES INC is rather low; currently it is at 19.15%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.66% trails that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.25%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 45.00% compared to the year-earlier 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.
  • CPI AEROSTRUCTURES INC's earnings per share declined by 45.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CPI AEROSTRUCTURES INC swung to a loss, reporting -$2.98 versus $0.92 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus -$2.98).

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

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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.

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