GR: Sweet Dreams(liner) For Goodrich

Goodrich Corporation supplies components, systems, and services to the commercial and general aviation airplane markets, as well as to the defense and space markets worldwide. It offers nacelles, which include thrust reversers, inlet and fan cowls, nozzle assemblies, exhaust systems, and other structural components; and actuators, including primary and secondary flight controls, helicopter main and tail rotor actuation systems, engine and nacelle actuation systems, utility actuation systems, precision weapon actuation systems, and land vehicle actuation systems. The company also provides landing gear systems; aircraft wheels and brakes; and engine control systems, such as fuel metering controls, fuel pumping systems, electronic controls, variable geometry actuation controls, and engine health monitoring systems. Further, Goodrich offers optical and space systems, including custom engineered electronics, optics, shortwave infrared cameras and arrays, and electro-optical products and services; aircraft and engine sensors that provide critical measurements for flight control, cockpit information, and engine control systems; and aircraft electrical power systems. The company sells its products and services directly to its customers through an internal marketing and sales force primarily in North America, Europe, and Asia. No one is benefiting more than Goodrich as the current commercial aerospace boom continues. Goodrich has recently inked a deal with Boeing as the exclusive provider of content on the new 787 Dreamliner. It is one of the most anticipated aircraft in years. The Dreamliner has already received $100 billion in orders from 47 different airlines at home and abroad. Over the next two decades, Boeing hopes to sell 2000 of the $160 million aircraft. Goodrich will provide $3 million on each plane that has already garnered 683 orders that exceeds $2 billion. Goodrich provided only a fraction of the equipment on the 737,747,767 and 777 until the deal was made through 2012. Goodrich's commercial aircraft division use to rely more on Airbus for revenue. Those contracts still look good as the 350(direct competition to the Dreamliner), is being produced and the all new A380 (world's largest commercial passenger plane) will be in production soon. The A380 has been plagued by setbacks and problems as it should have been flying last year, but will finally are in service the forth quarter in Singapore. Since GR provides $6 million in components to each A380, its release could have unbelievable results for the company. And the need for a larger commercial airliner is evident with the phenomenal growth in international travel by emerging markets. All said Goodrich's deal with Boeing and Airbus has only accounted for 25% of sales. This figure should be much higher over the next few years with their increased exposure. This year's breakdown is approximately 14% for Airbus and 10% for Boeing, but that number should shift, but how much depends on the A350's success. Within the next 5 years, more than 12000 commercial aircraft will be delivered. Goodrich supplies equipment on anything and everything that flies, so this is also beneficial. It is estimated that the airline up cycle will last until 2011 and commercial aircraft orders should be up as much as 10% over last year. Anyone that's been around for a while remembers the Goodrich tires. That business was sold to Michelin in 1988. Today they operate in three segments. Original-aircraft-equipment accounts for 33 percent, aircraft replacement parts 36 percent, and technology for military and aerospace 25 percent. Parts replacement is growing at a 10-14% clip and military is growing at over 10%. In my opinion, the market hasn't given full credit to GR for the upswing. If you check valuations on BEAV, HXL, and LDSH it is moderately undervalued (BEAV and PCP are two of my other favorites in this category). If Goodrich is valuated closer to the groups multiples the stock should be sitting closure to $74. It is rumored that GR is in the process of raising its dividend to $.80 and has already purchased 2.5 million shares this year. At this rate they will be buying back more next year. Over the past five years GR has grown 24 percent per year and expects 15 percent the next five years. Those numbers are probably low as the military announced a 100 billion order for refueling aircraft. The Airbus 350 or Boeing Dreamliner will be used so GR will benefit no matter who is chosen(they will probably split the deal Boeing 75 percent and Airbus 25 percent due to concerns that Airbus will not be able to provide the planes in a timely fashion). Current P/E is 19 but forward is a meager 15. PEG ratio is a reasonable 1.12. In my opinion this entire segment is good, with BEAV leading the way in growth and GR in value. I think that valuations in this group will skyrocket just as they did this year for infrastructure companies. There is still time to get in as only part of the growth is realized. I would buy this stock after it takes out 65 and the double top for a 52 week high.