Goodrich Corporation - Growth & Income

Although shares of Goodrich Corporation (GR) have soared more than 30% since late August, the stock is still reasonably valued because of a corresponding rise in earnings estimates.

The company reported strong third quarter 2010 results driven by solid sales growth. Earnings per share came in 11% above the Zacks Consensus Estimate, marking the second consecutive positive earnings surprise. It is a Zacks #2 Rank (Buy) stock.

Company Description

Goodrich Corporation supplies systems and services to the aerospace, defense and homeland security markets. The company is headquartered in Charlotte, North Carolina and has a market cap of $11.2 billion.

Third Quarter Results

The company reported third quarter earnings per share of $1.25, a 9.6% increase over the same quarter in 2009. It beat the Zacks Consensus Estimate by 11%.

Total sales were up 6.1% year-over-year driven by 17% growth in Electronic Systems. The Nacelles and Interior Systems division grew a modest 4% while Actuation and Landing Systems was flat.

Operating income expanded 14.1% as the company was able to leverage its fixed expenses.

Outlook

Following the solid quarter, management revised its guidance for 2010 EPS to $4.30-$4.35. The Zacks Consensus Estimate is a bit higher at $4.39, representing a 4.8% increase over 2009 EPS.

In 2011, management expects sales growth of 10-11% and earnings of $5.00 to $5.20 per share. The 2011 consensus estimate is currently $5.25, corresponding to 20% EPS growth. It is a Zacks #2 Rank (Buy) stock.

Dividend

After cutting its dividend in 2002, the company has raised it 4 times at a compound annual growth rate of 4.8%. It currently yields 1.3%.

The company has a relatively low payout ratio of 26%.

Valuation

Shares trade at 17.1x forward earnings, in-line with its peers. Its return on equity of 17.6% beats the industry average of 9.5%. This justifies the price to book value premium of 3.4 vs. 1.9.

Shares have soared more than 30% since late August.

GR: Goodrich Corporation