Why B/E Aerospace Inc. Shares Took Off

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 B/E Aerospace Inc. (NASDAQ: BEAV  ) finished the day with a 9% gain after topping out at a gain of nearly 13% this morning. The airline supply specialist is evidently exploring "strategic alternatives" and has retained Citigroup advisors to guide it through this process on the financial side. It has also retained law firm Shearman & Sterling for legal advice.

So what: B/E reported its earnings a little less than two weeks ago, and there was little indication that the company might need to change its course after beating Wall Street on both its top and bottom lines. However, the company issued an unexpected press release this morning to announce that it might either sell itself to a larger firm or divest part of its business. However, the press release cautions that "no decision has been made, and there can be no assurance that the Board's exploration of the Company's strategic alternatives will result in any transaction being entered into or consummated."

Now what: B/E has shown its investors nothing but strength and solidity over the past few years. Its shares have gained over 500%, while earnings have grown over 150% and free cash flow was nearly quadrupled, since late 2009. The company does have nearly $2 billion in long-term debt, but it's had no difficulty managing that debt before. Wall Street's analysts also expect the company to continue growing at a brisk pace as it serves the needs of the world's many airlines. All in all, there's no reason why today's announcement should change anyone's mind about B/E's stock. It's still a solid company with good prospects, and unless its management finds a buyer or does something similarly earth-shaking, B/E should continue to be a worthwhile investment for the long term.

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