On Jan 2, 2014, Zacks Investment Research upgraded
Elbit Systems Ltd.
) to a Zacks Rank #1 (Strong Buy).
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Why the Upgrade?
Elbit Systems reported positive earnings surprises in 2 out of
the past 4 quarters with an earnings beat of 26.3%. In the
previous quarter, the company reported earnings of $1.32 per
share, surpassing the Zacks Consensus Estimate by 3.9%. Quarterly
earnings were also 11.9% higher than the year-ago figure,
primarily on the back of an improvement in revenues as a result
of strong performance at the company's Computers, Communications,
Intelligence and Command and Control ("C4I") and airborne systems
Elbit Systems expects strong demand from the Asia-Pacific and the
Latin American region to play an important role to cover the
contract shortfalls from the U.S. In Dec 2013, the company inked
a contract worth $229 million with the Australian Department of
To cope up with the growing demand from the clients at the
Asia-Pacific region, Elbit Systems and a Korean company called
Sharp Aviation K formed a joint venture called Sharp Elbit
Systems Aerospace ("SESA"). The new entity provides various kinds
of products and services, including Korean Light Attack
Helicopter and the Korean Future Fighter Development project.
As of Sep 30, 2013, the company had a backlog of orders of $5.7
billion. Elbit Systems has already finished a part of backlog
orders in 2013 and the major portion of it will be completed in
2014, 2015 and 2016. This will ensure a steady revenue stream.
The present valuation also makes Elbit Systems attractive. As of
Jan 2, 2014, the company's forward P/E multiple was 11.1%, a
discount of 32.9% to the peer group average of 16.6%. The
company's return on equity ("ROE") was 20.7%, higher than the
peer group average of 14.7%.
Other Stocks to Consider
Some other stocks worth considering in the aerospace and defense
equipment industry include
Alliant Techsystems Inc.
Spirit AeroSystems Holdings, Inc.
). While Astronics Corporation holds a Zacks Rank #1 (Strong
Buy), Alliant Techsystems and Spirit AeroSystems carry a Zacks
Rank #2 (Buy).