Wells Fargo Upgrades Esterline Tech (ESL) to Outperform; Pressure From FQ4 Miss And Guidance Make Compelling Risk/Reward

Wells Fargo upgraded Esterline Tech (NYSE: ESL) from Market Perform to Outperform with a price target range of $63-$66 from $57-60.

Wells analyst says, "We are upgrading our rating on ESL shares as the stock should be weaker following the company’s FQ4 2011 earnings that missed our and the Street’s consensus expectations. We were concerned that purchase accounting adjustments would reduce FQ1 2012, but the expense is more than we expected and as a result, the company’s initial FY2012 guidance was well below consensus. We lower our FY2012 EPS estimate to $5.20 from $5.60 as a result. This had been the primary risk we identified in not recommending the stock and now believe the stock’s risk/reward is more favorable. At about 8x CY2012E EPS and 6.2x EBITDA, we believe the shares reflect the weak FY2012 guidance and the risk for additional downside in Esterline’s defense businesses without giving much credit for the growth in commercial aerospace OEM and aftermarket businesses. The first quarter of FY2012 should be held back by the purchase accounting issues."

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.

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