SAF FP

Publicly traded companies mentioned herein: General Electric Company (GE), Safran SA (SAF FP), Zodiac Aerospace (ZC FP)

Highlights

The presenter is long shares of French aircraft-engine maker Safran (SAF FP) in the mid-€60s and sees meaningful upside for shareholders over the next 12-24 months. While he does not love the 9.6 billion euro deal to acquire Zodiac (at €29.40/ share), he does see a good opportunity to expand the airplane seat-maker’s depressed EBIT margins. Regardless, the stock is “incredibly cheap relative to everyone else in the industry” at just under 12x his €5.75 2018 EPS forecast (versus the Street in the mid-to-high €4s/ share). The stock has traded sideways over the last two years largely due to concerns about the transition from its CFM to new Leap engines (the Leap engines are made by CFM, a 50/50 JV between Safran and GE); however, the presenter said, “Everything seems to be going well now and even if there were an issue it would not be a problem in the long-run issue”.