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(Updated - October 13, 2016 9:20 AM EDT)
Goldman Sachs downgraded BE Aerospace (NASDAQ: BEAV) from Buy to Neutral with a price target of $52.00 (from $56.00). Analyst Noah Poponak noted widebody Original Equipment risk, and he sees limited upside.
"We downgrade BEAV to Neutral from Buy. BEAV has a stronger position than most in the Aerospace supply chain given its exposure to the aftermarket and its new products in Seller Furnished Equipment. However, the large piece of the business that is widebody Original Equipment has downside risks that are worsening as supply/demand in that subsegment looks particularly challenged. We see risk to the 2017 outlook, and to 2017-2019 consensus estimates as widebody production rate changes flow through," said Poponak.
Commenting on concerns, the analyst added, "1. Widebody OE. BEAV has large exposure to widebody OE, which is deteriorating rapidly. 2. Estimates and the outlook. While we think BEAV can maintain mid-single digit revenue growth, we do not believe the market has the CAGR quite calibrated given the degree of weakness in widebody OE. Our estimates are now below consensus, and we see risk in the 2017 outlook process. 3. Valuation. BEAV is up 40% from its 52-week low, and is now the second most expensive stock in our Aerospace coverage at 11.0X CY17E EBITDA. Investor expectations have risen."
Shares of BE Aerospace closed at $51.07 yesterday.
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