PCP : NYSE : US$268.10
Precision Castparts is a leading supplier of investment
castings, forgings and high performance alloys, and
fasteners, metal components, and assemblies for
aerospace, defense, power generation, and industrial
All amounts in US$ unless otherwise noted.
Transportation and Industrials — Airlines and Aerospace
WELL POSITIONED FOR TITANIUM
REBOUND; MAINTAIN BUY, RAISING
PRICE TARGET TO $300
We believe PCP stock will be driven higher by better-than-expected
execution, reflected in industry-leading margins and cash flow, and
additional acquisitions. We believe the expected fastener acceleration in
late 2014, coupled with an improvement in titanium pricing/demand,
will contribute to synergy upside and better-than-expected execution.
We are raising our price target to $300 and maintaining our BUY rating.
Our checks indicate that the 787 fastener acceleration is on track for
H2/C14, but we are not seeing concrete evidence yet. However, we
have increased confidence in a firming of titanium demand in
H2/C14, although pricing is likely to remain pressured in near term.
We see substantial upside to current Timet synergy estimates, based
on cost reductions and improving demand. However, it is unlikely
the company will update its 2016 $16.00 peak EPS guidance. Our
new 2014 and 2015 estimates are $12.14 and $14.17, respectively.
Our $300 price target is based on the average of a 21.0x EPS multiple
and a 14.2x EBITDA multiple, applied to our 2015 estimates. We believe
a multiple at the upper end of the historic range is appropriate
considering the improving fundamentals, execution upside and