KLX Inc (KLXI), the spinoff of B/E Aerospace Inc (BEAV), has been out of favor with investors, according to KeyBanc Capital Markets Analyst Michael Ciarmoli. He says the company has 25% energy exposure and 75% exposure to aerospace, and is a distributor of aerospace consumables.
“It seems that all investors have wanted to focus on was the 25% energy portion of their business, where they provide energy services to the U.S. market, specifically to the shale play,” Ciarmoli says. “The company was spun out around $50 a share, sold off to around $36 a share.”
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Ciarmoli says investors have been getting caught up too much in the energy side of KLX’s business. However, he says the company is the “800-pound gorilla” in terms of servicing the airlines with aftermarket capabilities.
“We think the aerospace assets alone could be valued at $50, which means an investor would effectively be getting the energy business for free,” Ciarmoli says. “With the stock trading in the low $40s right now, we think that’s a pretty compelling play.”
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