MTU Aero, a fairly valued aircraft engine manufacturer.
(CercleFinance.com) - Down 5% since the beginning of the year at around 68 euros, the share of the German aircraft engine manufacturer MTU Aero Engines has not been the worst performer in its sector, an unenviable position occupied by Rolls-Royce (-17%).
However, the stock's record of close to 80 euros, which it brushed in May 2013, remains out of reach, and the share is not cheap.
The Munich-based group closed its last financial year with published sales up that were up 10.7% at 3.75 billion euros, with an operating margin that was down one percentage point at 10.1%, meaning operating profitability that was one or two points below those of Safran or Rolls-Royce. Its order backlog, which currently represents around three years of production, has less visibility than those of its peers.
In 2014, MTU expects organic sales growth of about 5%, which is almost the same as Safran, while Rolls-Royce expects to experience a "pause" in its growth. However, its operating profit is expected to be flat, while Safran expects this to increse by over 10%.
What about consensus forecasts? Both this year, as in 2015, Safran is expected to post the strongest growth in EPS (+11.3% and +15.5% respectively). Earnings at Rolls-Royce and MTU are only expected to inch up by around 1% this year, before respectively increasing by 8.6% and 5.5% in 2015.
Regarding multiples, the 2014 P/Es of these three stocks are very close to each other at almost 16x. For 2015, MTU has the highest P/E (15.2x against around 14.5x for the other two stocks). This raises questions about MTU's upside potential, as the stock seems to be fairly valued at its current prices.
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