|
|
Enron Mail |
SIVY ON STOCKS from CNNmoney.com
October 26, 2001 ******************[ A D V E R T I S E M E N T ]**************** QUICK! If you won $25,000 CASH what would be on your "Best Of" list? Keep thinking because here's a chance to try to win the $25,000 Grand Prize. BONUS: See what else has been selected "Best Of" at money.com and try an issue of MONEY Magazine FREE! Click Here: http://www.money.com/bestof **************************************************************** Parts for planes Honeywell and United Technologies are key subcontractors for the biggest defense project ever. By Michael Sivy NEW YORK (CNNmoney) - After the market closed on Friday, the Defense Department announced the winner of the largest military project in history -- the $200 billion Joint Strike Fighter. This plane will be a mainstay for three branches of the U.S. armed forces as well as the U.K.'s navy and air force. Lockheed-Martin was the big winner -- but it wasn't the only one. Boeing, which also had bid on the project, will likely make parts of the plane. And a host of other defense companies stand to benefit from subcontracting deals. United Technologies is virtually a sure thing, since that company's Pratt & Whitney division was set to provide engines for both the Lockheed and the Boeing proposals. Honeywell is also expected to be a major subcontractor. Both Honeywell and United Technologies look like irresistible buying opportunities for contrarian investors with a time horizon beyond three years or so. The stocks got clobbered after Sept. 11 because both companies make important components used on commercial aircraft. With airlines reeling from the drop-off in travel, the near-term outlook for that market is dim. From a longer-term perspective, however, demand for aircraft engines and subassemblies should be just dandy. Even before the war on terrorism, U.S. military spending was slated to rise over the next few years. And after the twin towers fell, another $20 billion was added to the budget for the current fiscal year. It's also important to realize that the commercial market won't stay depressed for more than a couple of years. Reporting its biggest loss ever on Wednesday, American Airlines' parent AMR said that it had cut back flights by 20 percent and that it was postponing 29 of the 45 new plane deliveries scheduled for 2002. Air travel will eventually recover, however, and planes do wear out. That means that delayed deliveries do have to be made up within two or three years. United Technologies (UTX: up $2.54 to $57.01, Research, Estimates) gets 36 percent of its earnings from Pratt & Whitney engines and 18 percent from Sikorsky helicopters and aircraft control systems. The rest comes from air-conditioning and elevators. Although the stock price has rebounded from its lows, it's still down 14 percent from its Sept. 10 close. At a current $57 a share, the stock is trading at less than 16 times next year's earnings, which are projected to be down slightly from this year's results. Over the next five years, however, earnings growth could average as much as 15 percent annually. Honeywell's (HON: up $1.00 to $30.00, Research, Estimates) outlook is much the same, although the stock is also reeling from the aftershocks of its failed merger with General Electric. After the deal was stopped by European regulators, the stock dropped from $50 to $35. It fell again to $24 after Sept. 11 before rebounding somewhat. CEO Michael Bonsignore left Honeywell after the merger failed and previous CEO Lawrence Bossidy was called back into service. Bossidy is making tough restructuring moves that are hurting current results but will leave Honeywell even better positioned for the next upturn in aerospace, which accounts for 40 percent of Honeywell's sales and an even larger percentage of earnings. Currently $30 a share, Honeywell is trading at 15 times 2002 earnings, which are expected to be flat with this year's. Long-term growth is projected at 14 percent annually. Given the tough times that are likely before aerospace rebounds, it may be a little bit early for both these stocks. But for an investor with a long-term time horizon, the P/Es look awfully cheap compared with potential growth rates. ### Read all of Michael's columns at: http://money.cnn.com/markets/sivy/ To subscribe or unsubscribe to Sivy on Stocks, go to: http://money.cnn.com/email/ -------------------------------------------------- SPECIAL OFFER - MONEY MAGAZINE PERSONAL FINANCE COACHING SYSTEM Tap the expertise of MONEY for your specific personal finance needs with the help of a one-to-one coach... To learn more and speak to a coaching consultant, call 1-800-748-4056 x5705, or visit our website at: http://money.cnn.com/services/coach/index.html ----------------------------------------------------------- CONTACT THE BIGGEST COMPANIES IN THE WORLD! Over 5,000 contact names in the OFFICIAL FORTUNE Databases. DOWNLOAD THEM NOW! http://www.fortune.com/sitelets/datastore/index.html?mn01 ----------------------------------------------------------- * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Special Internet Offer!!! Sign up for a FREE trial issue of MONEY MAGAZINE at http://www.money.com/subscribe2 Or if you prefer call our toll-free number 1-800-544-4594 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * We may, from time to time, contact you with offers for Time Inc. products and services which we think may be of interest to you. If you would prefer us not to contact you in this manner, AND YOU DID NOT INDICATE THIS PREFERENCE AT THE TIME YOU SIGNED UP for the Sivy on Stocks online newsletter or any other Time Inc. online newsletters, please let us know by sending us an e-mail at <no_solicit@money.com<. Additionally, from time to time we may provide your e-mail address to carefully chosen companies whose offers we think may be of interest to you. If you would prefer us not use your e-mail address in this manner, AND YOU DID NOT INDICATE THIS PREFERENCE AT THE TIME YOU SIGNED UP for the Sivy on Stocks online newsletter or any other Time Inc. online newsletter, please let us know by e-mailing us at <no_transfer@money.com<.
|