Jefferies Cuts Price Targets on Esterline Tech (ESL) by 23%, Growth Opportunities Remain

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3 Buy, 1 Hold, 0 Sell

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Today's Overall Ratings:
Up: 20 | Down: 11 | New: 38

Jefferies is reiterating its Buy rating on shares of Esterline Tech (NYSE: ESL), but is slashing its price target on the shares from $84 to $65.

Due to higher research and development, lower revenues from the Avionics segment, and several modest contract adjustments, the company reported earnings of $0.62 per share, well below the firm's estimate of $0.86 per share.

To go inline with the company's recent performance, the firm is lowering its FY12 EPS estimate from $5.60 to $5.10. The firm notes half of the reduction reflects inventory write-up charges associated with Souriau.

Looking ahead free cash flows is forecasted to increase 40 percent year over year to $200 million for FY12. Jefferies believes ESL will use the additional cash to pay down debt.

An analyst at Jefferies comments, "Near-termorganic growth is likely to be in the low single digits. Continued expansion of the civil aerospace market at a high single digit pace is likely to more than offset the decline in the military market and push-out of certain military avionics retrofit and upgrade opportunities. The margins in Avionics may well face a bit of near-term pressure. Research and development fell heavily in the Sensors group during the quarter due to spending on the new temperature sensor for the Rolls-Royce Trent engine on the A350XWB. This should abate somewhat in FY12."

For an analyst ratings summary and ratings history on Esterline Tech click here. For more ratings news on Esterline Tech click here.

Shares of Esterline Tech closed at $51.08 yesterday, with a 52 week range of $47.48-$82.28.

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