Recommending BE Aerospace (BEAV)

As noted in my last post, I was looking to buy BE Aerospace below $40 as long as the fundamental story had not changed once the stock dropped to that level. Last Thursday an analyst with UBS downgraded the stock. The downgrade coupled with the speech given by Ben Bernanke on Thursday, which drove the entire market down, resulted in the share price dropping as low as $37.11 before ending the week at $38.04. I have now had a chance to review the conference call that the company held after their last earnings report on February, 4th. I can find nothing that leads me to believe the stock should have been downgraded. In fact, after reading the conference call, I'm very excited to be getting the opportunity to recommend the stock. The only fear I had about recommending the stock before reading the conference call was a possible further delay of the Boeing 787. But, during the conference call, management stressed that the 787 does not represent a very large portion of their current backlog. This is good news on two fronts. First, it leaves the possibility that the backlog will increase significantly once the 787 starts shipping and second, it means that the 787 has very little to do with the robust earnings and revenue growth expected this year. According to BEAV's management, the 787 is only mildly important to them in 2009 and it gets more significant from there. As with all the stocks that I recommend, I hope to put together a full report soon. For now, I can give some of the highlights about the earnings forecast given by management. The company earned $1.66 in 2007. They are projecting an increase of 38% for 2008 to $2.29 and an increase of 25% for both 2009 and 2010 to $2.80 and $3.50 respectively. I will use the opening price on Tuesday, February 19th as the basis for this recommendation.