One business sector that is expected to be experiencing solid growth in both the short and long term is the business-jet market, according to The Economist (http://www.economist.com/blogs/gulliver/2012/10/business-aviation). Honeywell Aerospace recently put out its annual Business Aviation Outlook, a forecast based on surveys of 1,500 business-jet operators worldwide.
According to the survey (and The Economist), “between 680 and 720 new business jets will be sold this year, a ‘single
Photo courtesy of priog.org
digit’ increase over last year.” The survey then predicts will get much bigger over the next 10 years with about 10,000 jets expected to be sold at a total price of $250 billion.
The article notes that the good news for the business-jet industry is not so much a reflection of positive global economic conditions as buyers wanting the various new features offered in newer jets. Honeywell’s report indicates that today’s buyers want jets with more range, more comfort and larger cabins.
Other statistics in the article include regional numbers. A total of 46 percent of the buyers in BRIC countries expect to buy a new jet in the next five years; the Russian business-jet fleet is expected to expand by 15 percent by 2017; the Indian and Chinese fleets by 18 and 30 percent, respectively. North America continues to lead the business-jet industry by a long shot “because of its massive installed base of jets…the region is expected to account for 53 percent of all sales in the next five years.”
On a related note, Lockheed Martin (LMT) hit a 52-week high Nov. 6, closing at $94.88.
There are a host of small cap stocks that work in the business-jet/aircraft industries. Here are a few randomly chosen companies to look at:
Wood Dale, IL-based AAR Corp. (NYSE: AIR, http://www.aarcorp.com) has a variety of aircraft-related businesses and does a lot of business with the US government. AIR sells and leases used commercial aircraft; repairs, leases and sells airplane parts, components and instruments; provides logistics services, designs and installs in-plane cargo loading systems, just to name a few of its business sectors. AIR was founded in 1951. Its 52-week trading range is $10-$23.67. AIR closed Nov. 6 at $15.06, up 11 cents.
South St. Paul, MN-based Ballistic Recovery Systems (PINK: BRSI, http://www.brsparachutes.com) is tiny, only slightly over $1 million in market cap. It makes rocket-deployed parachute systems for general aviation and recreational aviation aircraft that are designed to parachute the entire plane to safety in the event of an in-air emergency. BRSI stock barely trades at all, averaging only about 3,900 shares a day. Its 52-week range is $0.05-$0.30. It traded 10,000 shares Nov. 6 and closed at $0.14, up 4 cents.
Portland, OR-based Erickson Air-Crane Inc. (Nasdaq: EAC, http://www.ericksonaircrane.com) manufactures and operates Erickson S-64 Aircrane heavy-lift helicopters. One side of its business maintains, overhauls, repairs and provides aircraft services, the other side uses its fleet to aide in firefighting, timber hauling and infrastructure construction. AIR has a 52-week trading range of $5.35-$8.50. It closed Nov. 6 at $7.49, up 3 cents.
Calabasas, CA-based National Technical Systems * (NASDAQ:NTSC; http://www.nts.com/) is a leading provider of testing and engineering services with the largest network of test laboratories and engineering service centers in North America and more than 50 years of experience. The majority of its revenues come from the aerospace and defense industries. It also offers end-to-end unmanned aerial vehicle services. NTSC’s 52-week trading range is $4.22-$8.80. Its market cap is currently almost $91 million. It closed Nov. 6 at $7.92, up 8 cents for the day.
Monrovia, CA-based AeroVironment, Inc. (NASDAQ: AVAV; http://www.avinc.com/) engages in the design, development, production, support, and operation of unmanned aircraft systems, and efficient energy systems for various industries and governmental agencies. In late July, its market cap was $503 million and AVAV stock was trading for about $23. By early November it had not changed much. It closed Nov. 6 at $22.60, down 3 cents.
* Denotes client of Allen & Caron Inc., publisher of this blog.
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