Kaman Corp.: Ground control to Major Profits
Stow your gear and lock those seatbacks to their upright position, Kaman Corp. (Nasdaq:KAMN) is prepared for takeoff.
After quietly rising to $1 billion in annual revenue, the 63-year-old Connecticut company’s stock is reflecting the infusion of a new management team, a reorganization to focus on its core aerospace and industrial distribution operations, and some key acquisitions.
Kaman’s shares hit an all-time high of $39.31 the day after Christmas. Then, after sinking to a 52-week low of $21.15 on July 7 on aerospace concerns, share prices started to climb, raising investors’ hopes that the stock will again challenge that year-end peak. Kaman closed Monday at $28.80.
Analysts who follow Kaman believe the stock is worth acquiring: three rate it a “strong buy,” and two have it as a “buy,” according to Thomson Reuters. The median price target is $36, reflecting a 20% upside potential. While down some 22% this year, over the past five years Kaman’s shares increased 108%.
Kaman operates in two arenas, industrial distribution and aerospace. Most of its operations are in the Americas, but the company does have a presence in Europe, Asia and Australia.
Kaman is a defense contractor, and its primary subsidiary is Kaman Aerospace. But industrial accounts for nearly two-thirds of its business, and is the third-largest power transmission and motion control distributor in North America.
After almost nine years as CEO, Paul Kuhn retired, clearing the way for aerospace veteran Neal Keating to take the reins. Continuing a pattern set by Kuhn, Kaman has embarked on some energetic plans.
Kaman’s highlights this year include securing a contract extension to supply wing parts to Boeing Co. (NYSE:BA); landing a four-year pact with Sikorsky Aircraft worth nearly $200 million to make Black Hawk helicopter cockpits; ending a long-delayed contract with Australia to supply Seasprite helicopters; acquiring Industrial Supply Corp., which serves a number of markets; and paying $85.1 million for Brookhouse Holdings Ltd., a British maker of composite aircraft parts and supplies.
For 2007, Kaman reported a 48.1% increase in net earnings from continuing operations to $36.5 million, and a 44.6% increase in earnings per share to $1.46. Net sales from continuing operations grew 9.5%, to $1.1 billion.
In the three months ended June 27, Kaman reported net earnings from continuing operations of $6.1 million, or $0.24 a share, compared with $9.0 million, or $0.36 a share, in the second quarter of 2007. Net sales from continuing operations increased 16.1% to $316.3 million.
Arnold Ursaner, founder of CJS Securities in White Plains, N.Y., wrote to clients last month that the changes made by Keating “position the company for more visible, stable and higher margin multi-year growth.”
“The pullback in the share price caused by investor apathy toward aerospace-related companies has created an attractive entry point to build/expand core positions,” he wrote in an Aug. 8 update that reiterated his “buy” rating and a $38 price target.
But against the backbeat of rising demand in aerospace and industrial, at the end of 2007, the music stopped playing at Kaman, as it sold its music division to Fender Musical Instruments for $117 million.
Music?
The dichotomy between its nuts-and-bolts businesses and drums, guitars and other instruments wasn’t too offbeat: in addition to inventing helicopters, company founder Charles Kaman is an accomplished jazz musician.
Now, investors are hoping to hear the sweet tune of increased profitability.
After quietly rising to $1 billion in annual revenue, the 63-year-old Connecticut company’s stock is reflecting the infusion of a new management team, a reorganization to focus on its core aerospace and industrial distribution operations, and some key acquisitions.
Kaman’s shares hit an all-time high of $39.31 the day after Christmas. Then, after sinking to a 52-week low of $21.15 on July 7 on aerospace concerns, share prices started to climb, raising investors’ hopes that the stock will again challenge that year-end peak. Kaman closed Monday at $28.80.
Analysts who follow Kaman believe the stock is worth acquiring: three rate it a “strong buy,” and two have it as a “buy,” according to Thomson Reuters. The median price target is $36, reflecting a 20% upside potential. While down some 22% this year, over the past five years Kaman’s shares increased 108%.
Kaman operates in two arenas, industrial distribution and aerospace. Most of its operations are in the Americas, but the company does have a presence in Europe, Asia and Australia.
Kaman is a defense contractor, and its primary subsidiary is Kaman Aerospace. But industrial accounts for nearly two-thirds of its business, and is the third-largest power transmission and motion control distributor in North America.
After almost nine years as CEO, Paul Kuhn retired, clearing the way for aerospace veteran Neal Keating to take the reins. Continuing a pattern set by Kuhn, Kaman has embarked on some energetic plans.
Kaman’s highlights this year include securing a contract extension to supply wing parts to Boeing Co. (NYSE:BA); landing a four-year pact with Sikorsky Aircraft worth nearly $200 million to make Black Hawk helicopter cockpits; ending a long-delayed contract with Australia to supply Seasprite helicopters; acquiring Industrial Supply Corp., which serves a number of markets; and paying $85.1 million for Brookhouse Holdings Ltd., a British maker of composite aircraft parts and supplies.
For 2007, Kaman reported a 48.1% increase in net earnings from continuing operations to $36.5 million, and a 44.6% increase in earnings per share to $1.46. Net sales from continuing operations grew 9.5%, to $1.1 billion.
In the three months ended June 27, Kaman reported net earnings from continuing operations of $6.1 million, or $0.24 a share, compared with $9.0 million, or $0.36 a share, in the second quarter of 2007. Net sales from continuing operations increased 16.1% to $316.3 million.
Arnold Ursaner, founder of CJS Securities in White Plains, N.Y., wrote to clients last month that the changes made by Keating “position the company for more visible, stable and higher margin multi-year growth.”
“The pullback in the share price caused by investor apathy toward aerospace-related companies has created an attractive entry point to build/expand core positions,” he wrote in an Aug. 8 update that reiterated his “buy” rating and a $38 price target.
But against the backbeat of rising demand in aerospace and industrial, at the end of 2007, the music stopped playing at Kaman, as it sold its music division to Fender Musical Instruments for $117 million.
Music?
The dichotomy between its nuts-and-bolts businesses and drums, guitars and other instruments wasn’t too offbeat: in addition to inventing helicopters, company founder Charles Kaman is an accomplished jazz musician.
Now, investors are hoping to hear the sweet tune of increased profitability.
About the Author
Contributing author Paul Rolfes is assistant business editor at The Courier-Journal, the largest daily newspaper in Kentucky.
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