Why GenCorp's Shares Jumped
Jul 23rd 2012 3:55PM
Updated Jul 23rd 2012 3:58PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: GenCorp will pay $550 million for the unit that makes liquid-fueled rocket propulsion systems. United Technologies has said it would use the money to fund its purchase of Goodrich Corp.
GenCorp said the deal will help the company's strategic position in the competitive marketplace.
Now what: GenCorp is paying $150 million less for the company than United Technologies did seven years ago, but the landscape has changed since then. The end of the U.S. space shuttle program has brought uncertainty to the market and earnings for GenCorp in particular haven't been very strong. Analysts are only expecting $0.32 per share in earnings this fiscal year, which would be a 24 P/E ratio at the current price, and the company has missed earnings estimates three of the last four quarters. That's just not a price I'm willing to pay with the uncertainty in the market right now.
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The article Why GenCorp's Shares Jumped originally appeared on Fool.com.Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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