William L. Moore
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Drexel Now Sees Esterline Technologies As A Margin Recovery Story, Upgrades To Buy

Drexel Hamilton has upgraded Esterline Technologies Corporation  to Buy from Hold and set a target price of $86, citing margin recovery opportunities.

Over the past two years, Esterline has been focusing on efficiency through lean initiatives (E3), strategic sourcing and global footprint optimization. It has also been dealing with a State Department mandated export compliance program.

"Post the 3QFY16 earnings call on August 4, we've come to view ESL as a margin recovery story with good FCF characteristics where one-off non-operating charges should be less and less impactful to numbers," analyst Pete Skibitski wrote in a note.

The analyst said the third quarter brought clarity to the progress being made and he sees much of the charges related to the above initiatives ending by second quarter FY17 (March 2017).

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