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BAE Systems plc And Cobham plc Climb To New 52-Week Highs While Rolls-Royce Holdings PLC Stalls

Companies in the aerospace and defence sector are certainly experiencing mixed fortunes at the moment.

BAE Systems hits new highs

BAE Systems (LSE: BA)(NASDAQOTH: BAESY.US) keeps hitting new 52-week highs — the shares have spiked to hit a new record on Thursday of 520.5p, and are trading at 516p as I write.

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There hasn’t been much recent news, but anticipation seems keen ahead of full-year results due on 19 February. Going by what the analysts say, we’re expecting to see a 13% fall in earnings per share (EPS), but that’s just down to the erratic nature of payments for long-term contracts. P/E values are around the FTSE-100 average of 14, while dividend yields are ahead at 4% to 4.5%. At Q3 time, BAE’s order intake was going strong, and a couple of recent acquisitions should boost profit.

Cobham trading well

The picture at Cobham (LSE: COB) is similar, with the shares up steeply since October, to reach a 52-week high on Friday of 339.4p. New contracts are rolling in, and at Q3 time we heard that “trading performance in the first nine months of the year has been in line with the Board’s expectations“.

The company said work still needed to be done to achieve full-year targets, but its successful cost-cutting suggests we’re on track to see a modest EPS fall followed by a strong recovery in 2015. Net debt was up at the Q3 stage, to £1.2bn from £0.3bn a year previously, but that was due to the acquisition of Aeroflex in September.

Its dividend yield is rising and getting close to twice covered, and should approach 4% by 2016.

What’s wrong at Rolls-Royce?

Things are still looking tough at Rolls-Royce (LSE: RR)(NASDAQOTH: RYCEY.US), whose shares are coming off a 52-week low of 777p in October. They have at least recovered 15% since then to 903p, but the price is still down 25% over 12 months.

Rolls rocked the market in 2014 with a couple of profit warnings, and there’s no return to earnings growth expected before 2016 at the earliest. The company has embarked on a cost-cutting programme, and sold off its Energy gas turbine and compressor business to Siemens for a £785m in a deal that concluded in December. Rolls-Royce is on the way back, but the shares are not looking cheap to me at the moment.

Best value?

Of these three, BAE would be my choice right now, partly on fundamental valuation measures but also due to its big order book that it has managed to keep well filled right through the global recession.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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