Esterline Technologies Corporation

After a record 2010, Esterline Technologies Corporation (ESL - Snapshot Report) started off fiscal 2011 on the same strong note, beating the Zacks Consensus Estimate by 47%. This Zacks #1 Rank (strong buy) continues to be a value with a forward P/E of 14.3x estimates.

Aerospace Is Hot

Who knew aerospace could be this strong coming out of the recession? Esterline manufactures specialized parts in Avionics & Controls, Sensors & Systems and Advanced Materials for the aerospace and defense markets.

80% of its revenue comes from aerospace and defense with 20% from industrial applications in those areas.

It has global reach, with facilities in 12 U.S. states, Canada, France, Germany and the United Kingdom.

Earnings Rise 136.6% Compared to Fiscal Q1 of 2010

On Feb 24, Esterline Technologies reported its fiscal first quarter 2011 results and blew by the Zacks Consensus Estimate for the fourth quarter in a row. The company has averaged 25% earnings surprises over the past 4 quarters.

Earnings per share were 97 cents compared to the consensus of 66 cents. The company made just 41 cents in the year ago quarter.

Sales rose 10.6% to $370.8 million from $335.3 million in the year ago quarter. The stronger spare parts market in the commercial aerospace side boosted results in the quarter.

On the aerospace side for defense customers, the company benefited from strength in retrofit work for C130s, UH-60 Blackhawks and other legacy platforms. Strength was seen in the emerging markets, especially Brazil and India, where defense budgets are rising.

New orders for the first quarter climbed 18.1% to $399.3 million from $338 million for the year ago period. Backlog held firm at $1.1 billion.

Outlook for 2011

Esterline Technologies reiterated its Jan 26 earnings guidance of $4.55 to $4.80 per share which was raised from the prior guidance of $4.40 to $4.65 after aftermarket demand remained strong.

The company acknowledges the risk in the uncertainty surrounding the U.S. defense budget and possible budget cuts but the company said it is managing it.

Zacks Consensus Estimates Rise

Analysts adjusted estimates after yet another big beat. The Zacks Consensus jumped to $4.81 from $4.64 in the last 60 days. That is earnings growth of 12.7%.

The fiscal 2012 Zacks Consensus has also moved higher in that same time period, rising to $5.32 from $5.08 per share for earnings growth of another 10.5%.

The company is scheduled to report fiscal second quarter results on May 26.

Solid Fundamentals

In addition to a P/E that is under 15, the cut-off I use for "value" stocks, Esterline also has a price-to-book ratio of 1.4 which is well within the value parameters of under 3.0.

The company also has a solid return on equity (ROE) of 10.8%.

Shares have seen steady gains since the March 2009 low and are near a 3-year high.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

Read the full analyst report on ESL