July 23, 2012
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 GenCorp (NYSE: GY ) jumped 12% today after the company announced it would buy United Technologies' (NYSE: UTX ) Rocketdyne unit.
So what: GenCorp will pay $550 million for the unit that makes liquid-fueled rocket propulsion systems. United Technologies has said it would use the money to fund its purchase of Goodrich Corp.
GenCorp said the deal will help the company's strategic position in the competitive marketplace.
Now what: GenCorp is paying $150 million less for the company than United Technologies did seven years ago, but the landscape has changed since then. The end of the U.S. space shuttle program has brought uncertainty to the market and earnings for GenCorp in particular haven't been very strong. Analysts are only expecting $0.32 per share in earnings this fiscal year, which would be a 24 P/E ratio at the current price, and the company has missed earnings estimates three of the last four quarters. That's just not a price I'm willing to pay with the uncertainty in the market right now.
Interested in more info on GenCorp? Add it to your watchlist by clicking here.
More Expert Advice from The Motley Fool
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013
." I invite you to take a copy, free for a limited time. Just click here
to access the report and find out the name of this under-the-radar company.