May 13, 2008
Knobias Clip Report (05-12-2008)
By admin
Submitted By Knobias ClipReport
KAMN: Could See Action on Helicopter Shortage
Monday’s session began with a bang for the bulls as bears went into hiding waiting for more ammo in the form of new economic data expected to be reported later in the week. Oil helped the cause with a pullback for the first time in 6 sessions. The price still is extremely elevated heading into the summer driving, but many expected a continued decline with rumors regarding a meeting of US administrators to help the falling greenback.
But even if oil prices drop, the search for it will continue to expand. One area that’s seen growth is off-shore. Evident by the forecasts for Transocean, (RIG), Noble (NE), and Diamond Offshore Drilling (DO) the sector will see higher drilling rates and increased visibility.
National oil companies have been locking in drilling contracts in recent months while most publicly traded oil majors “have been waiting on the sidelines,” Dahlman Rose analyst, Omar Nokta wrote in a client note. “Now, with limited availability and record high leading edge rates, they must combat declining reserves and production to satisfy stakeholder demands.”
The trickledown effect of the increase in off shore drilling is helicopters. With the increased global demand for energy, more helicopter transport will be required with an enhanced standard of safety and productivity.
One name in the sector that might be worth a look is Kaman Corporation (KAMN). The Company conducts its business in the aerospace and industrial distribution markets with Boeing and Sikorsky being its principal customers. According to their latest 10-K, Boeing and Sikorsky compromised 87.8% of total segment sales. Their other customers included Bell Helicopter, Spirit AeroSystems and Shenyang Aircraft Corporation.
The helicopters segment markets its helicopter engineering expertise and performs subcontract work for other manufacturers. It also refurbishes, provides upgrades and supports Kaman SH-2G maritime helicopters operating with foreign militaries as well as K-MAX “aerial truck” helicopters operating with government and commercial customers in several countries. Customers for the SH-2G aircraft include the Egyptian Air Force and the Australian, New Zealand and Polish navies. Operations are primarily conducted at the Bloomfield, Connecticut facility.
Currently, Kaman is trading at an 11.5 P/E ratio and only an 11.2 forward P/E. With a 9.3% estimated growth rate in revenue over the coming year along with a modest 2.2% dividend yield, the name is certainly one to follow over the coming months with the increased demand for all things helicopter. Investors would be wise to watch.
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