Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of aerospace components maker Esterline Technologies
So what: But why? I mean, sure, Esterline missed Street expectations for third-quarter revenues by a bit. But as CEO Brad Lawrence pointed out, "all three of Esterline's segments posted sales improvements." Plus, the company hit the analysts' earnings target on the nose, earning $1.21 per share from continuing operations.
Now what: The problem, it seems, is not what Esterline earned, but what it says it will earn over the rest of this year. After taking into account a "one-time" charge to earnings, management says it's now on track to report net profit for the year of about $4.50 per share -- down from previous expectations that had ranged as high as $4.95. My guess is that's the news that has investors so worried.
If so, though ... I can't say as I agree with them. Even $4.50 per share would be enough to give this company a 14 P/E ratio -- right in line with consensus expectations of 14% annual long-term earnings growth. That's almost by definition a fair price to pay.
Will investors agree that Esterline is now safe to buy? Add it to your watchlist and find out.
