Tuesday, January 26, 2016

Seeking Alpha: GKN Gets Interesting If They Can Get The Margins Up

Britain's GKN (OTCPK:GKNLY) is the kind of stock that can break an investor's heart. On one hand, the company's strong share in aerostructures and engine structures looks attractive as significant programs move forward at Airbus Group (OTCPK:EADSY) and Boeing (NYSE:BA). Likewise, the company's leadership in driveline components is appealing as penetration of all-wheel drive and hybrid vehicles grows. The problem is that aerospace and autos are cyclical businesses where OEMs habitually lean hard on suppliers and GKN doesn't have the best record of attractive sustained operating margins, free cash flow, or returns on capital.

If things go right, meaning that the aerospace and auto markets remain healthy, key programs ramp as expected, and GKN achieves better operating leverage, the shares could do very well over the next two to four years. If GKN drops the ball on margins, though, or if demand for aircraft and/or autos disappoint, the shares aren't likely to do so well.

Read more here:
GKN Gets Interesting If They Can Get The Margins Up

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