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 and defense parts supplier Esterline Technologies
So what: For the quarter, Esterline recorded robust sales growth of 19% to $485.9 million and reported an adjusted-profit (with goodwill losses excluded) of $1.12, which squeaked by Wall Street's expectations by $0.01. The real giddy-up in Esterline's share price has to do with the company's fourth-quarter and full-year guidance, which came in ahead of the Street's forecasts. Esterline cited strength in its backlog and an abatement in third-quarter growth deterrents as the reasoning behind its fourth-quarter profit forecast of $1.60-$1.70 versus the consensus $1.59 estimate.
Now what: Although Esterline's management feels relatively confident that the company is set to benefit from the next aerospace cycle, my optimism is much more muted. I'll give Esterline a golf clap for beating expectations, but I'm concerned about defense and aerospace spending in general, with big government cuts looming. Even at 10.5 times forward earnings, I'd be leery about buying into Esterline's optimism. For now, I'm happy staying on the sidelines.
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