bombardier

Every Thursday we bring you one of our best U.S. stock picks. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, most often from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster.

United Technologies fell slightly in late November, after Louis Chenevert, its chief executive for the past six years, retired suddenly. However, new CEO Gregory Hayes (who is also a former vice-president) will likely continue Chenevert’s focus on the company’s main aerospace and construction divisions.

These businesses operate in cyclical markets, but their outlook is bright. Airlines are replacing their aging fleets, increasing demand for jet engines and other parts, while developing countries’ ongoing urbanization fuels building-product sales.

...

TIM HORTONS INC., $96.97, Toronto symbol THI, shareholders will vote on the friendly takeover offer from BURGER KING WORLDWIDE INC., $34.81, New York symbol BKW, on Tuesday, December 9, 2014. If the deal is approved, Tim Hortons investors will have a number of options: They can sell their shares on the Toronto exchange and receive the current trading price of $96.97 (less brokerage commissions). If they don’t do that, they can opt for one of the three choices below by notifying their brokers no later than 5:00 p.m. ET on Tuesday, December 9, 2014....

United Technologies fell slightly in late November, after Louis Chenevert, its chief executive for the past six years, retired suddenly. However, new CEO Gregory Hayes (who is also a former vicepresident) will likely continue Chenevert’s focus on the company’s main aerospace and construction divisions. These businesses operate in cyclical markets, but their outlook is bright. Airlines are replacing their aging fleets, increasing demand for jet engines and other parts, while developing countries’ongoing urbanization fuels building-product sales. United Technologies also has another advantage many competitors can’t match: because of its many subsidiaries, it can offer construction clients an integrated package of building products, such as elevators, heating and fire-control systems....

Pat McKeough responds to many requests from members of his Inner Circle for specific stock tips as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week we offer you a report on one of the stocks profiled in these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “U.S. Stock Picks” on Thursday.

This week an Inner Circle Member asked us about a Canadian company that’s an international leader in the aircraft parts industry. Héroux-Devtek is the world’s third-largest maker of landing gear for aircraft, with clients such as Boeing, Embraer and Bombardier. Pat considers the company’s rising earnings in light of a recent acquisition and a new contract with Boeing. He also looks at the impact of shrinking military budgets around the globe on Héroux-Devtek’s prospects.

Q: Pat: What is your opinion on Héroux-Devtek Inc.? Best regards.

...

Héroux-Devtek Inc., $11.40, symbol HRX on Toronto (Shares outstanding: 35.9 million; Market cap: $409.6 million; www.herouxdevtek.com), is the world’s third-largest maker of landing gear for aircraft, particularly helicopters and small jets. It also makes metal enclosures for airborne radar and other electronic equipment. Customers include Boeing, Sikorsky, Bombardier and Embraer, as well as various militaries. About 75% of Héroux-Devtek’s sales come from outside of Canada. In February 2014, the company paid $138.8 million for U.K.-based landing gear maker APPH Ltd., which has four plants in the U.K. and one in Wichita, Kansas....

UNITED TECHNOLOGIES CORP. $110 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 911.7 million; Market cap: $100.3 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.1%; TSINetwork Rating: Above Average; www.utc.com) has five main divisions: Climate, Controls & Security (26% of 2013 revenue, 27% of earnings) makes heating and air conditioning equipment under the Carrier brand, as well as burglar alarms and fire-safety products; Pratt & Whitney (23%, 19%) manufactures aircraft engines; Aerospace Systems (21%, 21%) makes engine control systems and other parts for aircraft; Otis (20%, 27%) makes elevators; and Sikorsky (10%, 6%) makes helicopters.

The company’s revenue rose 10.0%, from $52.9 billion in 2009 to $58.2 billion in 2011.

In 2012, it bought North Carolina-based Goodrich Corp., which makes aircraft parts (including landing gear, wheels and brakes) and maintains and fixes planes. United Technologies paid $18.3 billion, including assuming $1.9 billion of Goodrich’s debt. However, it also sold some less important businesses, so its revenue fell 0.8%, to $57.7 billion, in 2012.

...

BOMBARDIER INC., Toronto symbols BBD.A $3.77 and BBD.B, $3.71, reported better-than-expected quarterly results this week. Without costs related to its recent restructuring, which included laying off 2% of its workforce, Bombardier’s earnings rose 34.5% in the quarter ended September 30, 2014, to $222 million, or $0.12 a share (all amounts except share prices in U.S. dollars). That beat the consensus estimate of $0.10 a share. A year earlier, the company earned $165 million, or $0.09 a share. Overall revenue gained 20.9%, $4.9 billion from $4.1 billion, also beating the consensus forecast of $4.82 billion....

We still think investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying stocks with strong business prospects.

These are companies that have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace.

Stocks like these give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

Here are 20 stocks we think meet those criteria:

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

...

BOMBARDIER INC. $3.71 (www.bombardier.com) has received a firm order for 40 of its upcoming CSeries passenger jets from Macquarie AirFinance, as well as options for an additional 10 aircraft. Including this order, the company now has firm orders for 243 CSeries planes, plus options for 320 more....

SNC-LAVALIN GROUP INC. $51 (www.snclavalin.com) designed and built Montreal’s Maison symphonique concert hall, which houses the Montreal Symphony Orchestra, in 2009. The company also operates the hall under a long-term deal with the Quebec government. However, SNC wants to focus on its main engineering and construction businesses, so it is selling the concession rights to this project for $77.6 million. That’s equal to 61% of the $126.7 million, or $0.83 a share, that the company earned in the first half of 2014. Buy. BOMBARDIER INC. $3.71 (www.bombardier.com) has received a firm order for 40 of its upcoming CSeries passenger jets from Macquarie AirFinance, as well as options for an additional 10 aircraft. Including this order, the company now has firm orders for 243 CSeries planes, plus options for 320 more. In all, these 563 planes are worth roughly $39 billion U.S., which is equal to two year’s revenue. Bombardier is still testing the new plane and expects to begin deliveries in the second half of 2015. Buy....