BE Aerospace announced yesterday that it was acquiring Blue
Dot Energy Services for $75 mm. Blue Dot is an energy services company that
provides parts distribution, rental equipment, and on-site services to the
industry. BE Aerospace is currently experiencing strong growth from its very
cyclical commercial aerospace business, however the company has been looking to
diversify into the oil and gas as others in the industry have done (i.e.
Precision Castparts Corp.). The goal is to profit heavily from these cyclical
swings in the aerospace market, however also diversify that risk to an extent
during the troughs. With close to $800 billion in commercial aircraft backlog
between the big 3, BE Aerospace is poised for strong growth in its aerospace business
for at least the medium-term. We reiterate a HOLD rating as recently the stock
has become close to fairly valued and believe now is not the time to enter new
positions in the stock.
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